The editorial page of The New York Times, January 18, 1920, carried an
interesting comment on the Federal Reserve System. The unidentified writer,
perhaps Paul Warburg, stated, "The Federal Reserve is a fount of credit, not
of capital." This is one of the most revealing statements ever made about the
Federal Reserve System. It says that the Federal Reserve System will never add
anything to our capital structure, or to the formation of capital, because it
is organized to produce credit, to create money for credit money and
speculations, instead of providing capital funds for the improvement of
commerce and industry. Simply stated, capitalization would mean the providing
of notes backed by a precious metal or other commodity. Reserve notes are
unbacked paper loaned at interest.

On July 25, 1921, Senator Owen stated on the editorial page of The New York
Times, The Federal Reserve Board is the most gigantic financial power in all
the world. Instead of using this great power as the Federal Reserve Act
intended that it should, the board....delegated this power to the banks, threw
the weight of its influence toward the support of the policy of German
inflation." The senator whose name was on the Act saw that it was not
performing as promised.

After the Agricultural Depression of 1920-21, the Federal Reserve Board of
Governors settled down to eight years of providing rapid credit expansion of
the New York bankers, a policy which culminated in the Great Depression of
1929-31 and helped paralyze the economic structure of the world. Paul Warburg
had resigned in May, 1918, after the monetary system of the United States had
been changed from a bond-secured currency to a currency based upon commercial
paper and the shares of the Federal Reserve Banks. Warburg returned to his
five hundred thousand dollar a year job with Kuhn, Loeb Company, but he
continued to determine the policy of the Federal Reserve System, as President
of the Federal Advisory Council and as Chairman of the Executive Committee of
the American Acceptance Council.

From 1921 to 1929, Paul Warburg organized three of the greatest trusts in the
United States, the International Acceptance Bank, largest acceptance bank in
the world, Agfa Ansco Film Corporation, with headquarters in Belgium, and I.G.
Farben Corporation whose American
branch Warburg set up as I.G. Chemical Corporation. The Westinghouse
Corporation is also one of his creations.

In the early 1920s, the Federal Reserve System played the decisive role in the
re-entry of Russia into the international finance structure. Winthrop and
Stimson continued to be the correspondents between Russian and American
bankers, and Henry L. Stimson handled the negotiations concluding in our
recognition of the Soviet after Roosevelt’s election in 1932. This was an
anti-climax, because we had long before resumed exchange relations with
Russian financiers.

The Federal Reserve System began purchasing Russian gold in 1920, and Russian
currency was accepted on the Exchanges. According to Colonel Ely Garrison, in
his autobiography, and according to the United States Naval Secret Service
Report on Paul Warburg, the Russian Revolution had been financed by the
Rothschilds and Warburgs, with a member of the Warburg family carrying the
actual funds used by Lenin and Trotsky in Stockholm in 1918.

An article in the English monthly "Fortnightly", July, 1922, says:

"During the past year, practically every single capitalistic institution has
been restored. This is true of the State Bank, private banking, the Stock
Exchange, the right to possess money to unlimited amount, the right of
inheritance, the bill of exchange system, and other institutions and practices
involved in the conduct of private industry and trade. A great part of the
former nationalized industries are now found in semi-independent trusts."

The organization of powerful trusts in Russia under the guise of Communism
made possible the receipt of large amounts of financial and technical help
from the United States. The Russian aristocracy had been wiped out because it
was too inefficient to manage a modern industrial state. The international
financiers provided funds for Lenin and Trotsky to overthrow the Czarist
regime and keep Russia in the First World War. Peter Drucker, spokesman for
the oligarchy in America, declared in an article in the Saturday Evening Post
in 1948, that:

"RUSSIA IS THE IDEAL OF THE MANAGED ECONOMY TOWARDS WHICH WE ARE
MOVING."

In Russia, the issuance of sufficient currency to handle the needs of their
economy occurred only after a government had been put in power which had
absolute control of the people. During the 1920s, Russia issued large
quantities of so-called "inflation money", a managed currency. The same
"Fortnightly" article (of July, 1922) observed that:

"As economic pressure produced the ‘astronomical dimensions system’ of
currency; it can never destroy it. Taken alone, the system is self-contained,
logically perfected, even intelligent. And it can perish only through the
collapse or destruction of the political edifice which it decorates."

120

"Fortnightly" also remarked, in 1929, that:

"Since 1921, the daily life of the Soviet citizen is no different from that of
the American citizen, and the Soviet system of government is more economical."

Admiral Kolchak, leader of the White Russian armies, was supported by the
international bankers, who sent British and American troops to Siberia in
order to have a pretext for printing Kolchak rubles. At one time in 1920, the
bankers were manipulating on the London Exchange the old Czarist rubles,
Kerensky rubles and Kolchak rubles, the values of all three fluctuating
according to the movements of the Allied troops aiding Kolchak. Kolchak also
was in possession of considerable amounts of gold which had been seized by his
armies. After his defeat, a trainload of this gold disappeared in Siberia. At
the Senate Hearings in 1921 on the Federal Reserve System, it was brought out
that the System had been receiving this gold. Congressman Dunbar questioned
Governor W.P.G. Harding of the Federal Reserve Board as follows:

DUNBAR: "In other words, Russia is sending a great deal of gold to the
European countries, which in turn send it to us?"

HARDING: "This is done to pay for the stuff bought in this country and to
create dollar exchange."

DUNBAR: "At the same time, that gold came from Russia through Europe?"

HARDING: "Some of it is thought to be Kolchak gold, coming through Siberia,
but it is none of the Federal Reserve Banks’ business. The Secretary of the
Treasury has issued instructions to the assay office not to take any gold
which does not bear the mint mark of a friendly nation."

Just what Governor Harding meant by "a friendly nation" is not clear. In 1921,
we were not at war with any country, but Congress was already beginning to
question the international gold dealings of the Federal Reserve System.
Governor Harding could very well shrug his shoulders and say that it was none
of the Federal Reserve Banks’ business where the gold came from. Gold knows no
nationality or race. The United States by law had ceased to be interested in
where its gold came from in 1906, when Secretary of the Treasury Shaw made
arrangements with several of the larger New York banks (ones in which he had
interests) to purchase gold with advances of cash from the United States
Treasury, which would then purchase the gold from these banks. The Treasury
could claim that it did not know where its gold came from since their office
only registers the bank from which it made the purchase. Since 1906, the
Treasury has not known from which of the international gold merchants it was
buying its gold.

The international gold dealings of the Federal Reserve System, and its active
support in helping the League of Nations to force all the nations
of Europe and South America back on the gold standard for the benefit of
international gold merchants like Eugene Meyer, Jr. and Albert Strauss, is
best demonstrated by a classic incident, the sterling credit of 1925.

J.E. Darling wrote, in the English periodical, "Spectator", on January 10,
1925 that:
"Obviously, it is of the first importance to the United States to induce
England to resume the gold standard as early as possible. An American
controlled Gold Standard, which must inevitably result in the United States
becoming the world’s supreme financial power, makes England a tributary and
satellite, and New York the world’s financial centre."

Mr. Darling fails to point out that the American people have as little to do
with this as the British people, and that resumption of the gold standard by
Britain would benefit only that small group of international gold merchants
who own the world’s gold. No wonder that "Banker’s Magazine" gleefully
remarked in July, 1925 that:

"The outstanding event of the past half year in the banking world was the
restoration of the gold standard."

The First World War changed the status of the United States from that of a
debtor nation to the position of the world’s greatest creditor nation, a title
formerly occupied by England. Since debt is money, according to the Governor
Marriner Eccles of the Federal Reserve Board, this also made us the richest
nation of the world. The war also caused the removal of the headquarters of
the world’s acceptance market from London to New York, and Paul Warburg became
the most powerful trade acceptance banker in the world. The mainstay of the
international financiers, however, remained the same. The gold standard was
still the basis of foreign exchange, and the small group of internationals who
owned the gold controlled the monetary system of the Western nations.

Professor Gustav Cassel wrote in 1928:

"The American dollar, not the gold standard, is the world’s monetary standard.
The American Federal Reserve Board has the power to determine the purchasing
power of the dollar by making changes in the rate of discount, and thus
controls the monetary standard of the world."

If this were true, the members of the Federal Reserve Board would be the most
powerful financiers in the world. Occasionally their membership includes such
influential men as Paul Warburg or Eugene Meyer, Jr., but usually they are a
rubber-stamp committee for the Federal Advisory Council and the London
bankers.

In May, 1925, the British Parliament passed the Gold Standard Act, putting
Great Britain back on the gold standard. The Federal Reserve System’s major
role in this event came out on March 16, 1926, when George Seay, Governor of
the Federal Reserve Bank of Richmond, testified before the House Banking and
Currency Committee that:
"A verbal understanding confirmed by correspondence, extended Great Britain a
two hundred million dollar gold loan or credit. All negotiations were
conducted between Benjamin Strong, Governor of the Federal Reserve Bank of New
York and Mr. Montagu Norman, Governor of the Bank of England. The purpose of
this loan was to help England get back on the gold standard, and the loan was
to be met by investment of Federal Reserve funds in bills of exchange and
foreign securities."

The Federal Reserve Bulletin of June, 1925, stated that:

"Under its arrangement with the Bank of England the Federal Reserve Bank of
New York undertakes to sell gold on credit to the Bank of England from time to
time during the next two years, but not to exceed $200,000,000 outstanding at
any one time."

A two hundred million dollar gold credit had been arranged by a verbal
understanding between the international bankers, Benjamin Strong and Montagu
Norman. It was apparent by this time that the Federal Reserve System had other
interests at heart than the financial needs of American business and industry.
Great Britain’s return to the gold standard was further facilitated by an
additional gold loan of a hundred million dollars from J.P. Morgan Company.
Winston Churchill, British Chancellor of the Exchequer, complained later that
the cost to the British government of this loan was $1,125,000 the first year,
this sum representing the profit to J.P. Morgan Company in that time.

The matter of changing the discount rate, for instance, has never been
satisfactorily explained. Inquiry at the Federal Reserve Board in Washington
elicited the reply that "the condition of the money market is the prime
consideration behind changes in the rate." Since the money market is in New
York, it takes no imagination to deduce that New York bankers may be
interested in changes of the rate and often attempt to influence it.

Norman Lombard, in the periodical "World’s Work" writes that:

"In their consideration and disposal of proposed changes of policy, the
Federal Reserve Board should follow the procedure and ethics observed by our
court of law. Suggestions that there should be a change of rate or that the
Reserve Banks should buy or sell securities may come from anyone and with no
formality or written argument. The suggestion may be made to a Governor or
Director of the Federal Reserve System over the telephone or at his club over
the luncheon table, or it may be made in the course of a casual call on a
member of the Federal Reserve Board. The interests of the one proposing the
change need not be revealed, and his name and any suggestions he makes are
usually kept secret. If it concerns the matter of open market operations, the
public has no inkling of the decision until the regular weekly statement
appears, showing changes in the holdings of the Federal Reserve Banks.
Meanwhile, there is no public discussion, there is no statement of the reasons
for the decision, or of the names of those opposing or favoring it."

123

The chances of the average citizen meeting a Governor of the Federal Reserve
System at his club are also slight.

The House Hearings on Stabilization of the Purchasing Power of the Dollar in
1928 proved conclusively that the Federal Reserve Board worked in close
cooperation with the heads of European central banks, and that the Depression
of 1929-31 was planned at a secret luncheon of the Federal Reserve Board and
those heads of European central banks in 1927. The Board has never been made
responsible to the public for its decisions or actions. The constitutional
checks and balances seem not to operate in finance.

The true allegiance of the members of the Federal Reserve Board has always
been to the central bankers. The three features of the central bank, its
ownership by private stockholders who receive rent and profit for their use of
the nation’s credit, absolute control of the nation’s financial resources, and
mobilization of the nation’s credit to finance foreigners, all were
demonstrated by the Federal Reserve System during the first fifteen years of
its operations.

Further demonstration of the international purposes of the Federal Reserve Act
of 1913 is provided by the "Edge Amendment" of December 24, 1919, which
authorizes the organization of corporations expressly for "engaging in
international foreign banking and other international or foreign financial
operations, including the dealing in gold or bullion, and the holding of stock
in foreign corporations." In commenting on this amendment, E.W. Kemmerer,
economist from Princeton University, remarked that:

"The federal reserve system is proving to be a great influence in the
internationalizing of American trade and American finance."

The fact that this internationalizing of American trade and American finance
has been a direct cause for involving us in two world wars does not disturb
Mr. Kemmerer. There is plenty of evidence to show how Paul Warburg used the
Federal Reserve System as the instrument for getting trade acceptance adopted
on a wide scale by American businessmen.

The use of trade acceptances, (which are the currency of international trade)
by bankers and corporations in the United States prior to 1915 was practically
unknown. The rise of the Federal Reserve System exactly parallels the increase
in the use of acceptances in this country, nor is this a coincidence. The men
who wanted the Federal Reserve System were the men who set up acceptance banks
and profited by the use of acceptances.

As early as 1910, the National Monetary Commission began to issue pamphlets
and other propaganda urging bankers and businessmen in this country to adopt
trade acceptances in their transactions. For three
years the Commission carried on this campaign, and the Aldrich Plan included a
broad provision authorizing the introduction and use of bankers’ acceptances
into the American system of commercial paper.

The Federal Reserve Act of 1913 as passed by Congress did not specifically
authorize the use of acceptances, but the Federal Reserve Board in 1915 and
1916 defined "trade acceptance", further defined by Regulation A Series of
1920, and further defined by Series 1924. One of the first official acts of
the Board of Governors in 1914 was to grant acceptances a preferentially low
rate of discount at Federal Reserve Banks. Since acceptances were not being
used in this country at that time, no explanation of business exigency could
be advanced for this action. It was apparent that someone in power on the
Board of Governors wanted the adoptance of acceptances.

The National Bank Act of 1864, which was the determining financial authority
of the United States until November, 1914, did not permit banks to lend their
credit. Consequently, the power of banks to create money was greatly limited.
We did not have a bank of issue, that is, a central bank, which could create
money. To get a central bank, the bankers caused money panic after money panic
on the business people of the United States, by shipping gold out of the
country, creating a money shortage, and then importing it back. After we got
our central bank, the Federal Reserve System, there was no longer any need for
a money panic, because the banks could create money. However, the panic as an
instrument of power over the business and financial community was used again
on two important occasions, in 1920, causing the Agricultural Depression,
because state banks and trust companies had refused to join the Federal
Reserve System, and in 1929, causing the Great Depression, which centralized
nearly all power in this country in the hands of a few great trusts.

A trade acceptance is a draft drawn by the seller of goods on the purchaser,
and accepted by the purchaser, with a time of expiration stamped upon it. The
use of trade acceptances in the wholesale market supplies short-term, assured
credit to carry goods in process of production, storage, transit, and
marketing. It facilitates domestic and foreign commerce. Seemingly, then, the
bankers who wished to replace the open-book account system with the trade
acceptance system were progressive men who wished to help American
import-export trade. Much propaganda was issued to that effect, but this was
not really the story.

The open-book system, heretofore used entirely by American business people,
allowed a discount for cash. The acceptance system discourages the use of
cash, by allowing a discount for credit. The open-book system also allowed
much easier terms of payment, with liberal extensions on the debt. The
acceptance does not allow this, since it is
a short-term credit with the time-date stamped upon it. It is out of the
seller’s hands, and in the hands of a bank, usually an acceptance bank, which
does not allow any extension of time. Thus, the adoption of acceptances by
American businessmen during the 1920’s greatly facilitated the domination and
swallowing up of small business into huge trusts, which accelerated the crash
of 1929.

Trade acceptances had been used to some extent in the United States before the
Civil War. During that war, exigencies of trade had destroyed the acceptance
as a credit medium, and it had not come back into favor in this country, our
people preferring the simplicity and generosity of the open-book system.
Open-book accounts are a single-name commercial paper, bearing only the name
of the debtor. Acceptances are two-name paper, bearing the name of the debtor
and the creditor. Thus they became commodities to be bought and sold by banks.
To the creditor, under the open-book system, the debt is a liability. To the
acceptance bank holding an acceptance, the debt is an asset. The men who set
up acceptance banks in this country, under the leadership of Paul Warburg,
secured control of the billions of dollars of credit existing as open accounts
on the books of American businessmen.

Governor Marriner Eccles of the Federal Reserve Board stated before the House
Banking and Currency Committee that: "Debt is the basis for the creation of
money."

Large holders of trade acceptances got the use of billions of dollars worth of
credit-money, besides the rate of interest charged upon the acceptance itself.
It is obvious why Paul Warburg should have devoted so much time, money, and
energy to getting acceptances adopted by this country’s banking machinery.

On September 4, 1914, the National City Bank accepted the first time-draft
drawn on a national bank under provisions of the Federal Reserve Act of 1913.
This was the beginning of the end of the open-book account system as an
important factor in wholesale trade. Beverly Harris, vice-president of the
National City Bank of New York, issued a pamphlet in 1915 stating that:

"Merchants using the open account system are usurping the functions of
bankers."

In The New York Times on June 14, 1920, Paul Warburg, Chairman of the American
Acceptance Council, said:

"Unless the Federal Reserve Board puts itself heart and soul behind the
untrammeled development of acceptances as a prime investment for banks of the
Federal Reserve Banks the future safe and sound development of the system will
be jeopardized."

This was a statement of the purpose of Warburg and his bunch who wanted
"monetary reform" in this country. They were out to get control
of all credit in the United States, and they got it, by means of the Federal
Reserve System, the acceptance system, and the lack of concern by the
citizens.

The First World War was a boon to the introduction of trade acceptances, and
the volume jumped to four hundred million dollars in 1917, growing through the
1920s to more than a billion dollars a year, which culminated in a high peak
just before the Great Depression of 1929-31. The Federal Reserve Bank of New
York’s charts show that its use of acceptances reached a peak in November,
1929, the month of the stock market crash, and declined sharply thereafter.
The acceptance people by then had gotten what they wanted, which was control
of American business and industry. "Fortune Magazine" in February of 1950
pointed out that:

"Volume of acceptances declined from $1,732 million in 1929 to $209 million in
1940, because of the concentration of acceptance banking in a few hands, and
the Treasury’s low-interest policy, which made direct loans cheaper than
acceptance. There has been a slight upturn since the war, but it is often
cheaper for large companies to finance imports from their own coffers."

In other words, the "large companies" more accurately, the great trusts, now
have control of credit and have not needed acceptances. Besides the barrage of
propaganda issued by the Federal Reserve System itself, the National
Association of Credit Men, the American Bankers’ Association, and other
fraternal organizations of the New York bankers devoted much time and money to
distributing acceptance propaganda. Even their flood of lectures and pamphlets
proved insufficient, and in 1919 Paul Warburg organized the American
Acceptance Council, which was devoted entirely to acceptance propaganda.

The first convention held by this association at Detroit, Michigan, on June 9,
1919, coincided with the annual convention of the National Association of
Credit Men, held there on that date, so that "interested observers might with
facility participate in the lectures and meetings of both groups," according
to a pamphlet issued by the American Acceptance Council.

Paul Warburg was elected President of this organization, and later became
chairman of the Executive Committee of the American Acceptance Council, a
position which he held until his death in 1932. The Council published lists of
corporations using trade acceptances, all of them businesses in which Kuhn,
Loeb Co. or its affiliates held control. Lectures given before the Council or
by members of the Council were attractively bound and distributed free by the
National City Bank of New York to the country’s businessmen.

Louis T. McFadden, Chairman of the House Banking and Currency Committee,
charged in 1922 that the American Acceptance Council was
exercising undue influence on the Federal Reserve Board and called for a
Congressional investigation, but Congress was not interested.

At the second annual convention of the American Acceptance Council, held in
New York on December 2, 1920, President Paul Warburg stated:

"It is a great satisfaction to report that during the year under review it was
possible for the American Acceptance Council to further develop and strengthen
its relations with the Federal Reserve Board."

During the 1920s Paul Warburg, who had resigned from the Federal Reserve Board
after holding a position as Governor for a year in wartime, continued to
exercise direct personal influence on the Federal Reserve Board by meeting
with the Board as President of the Federal Advisory Council and as President
of the American Acceptance Council. He was, from its organization in 1920
until his death in 1932, Chairman of the Board of the International Acceptance
Bank of New York, the largest acceptance bank in the world. His brother, Felix
M. Warburg, also a partner in Kuhn, Loeb Co., was director of the
International Acceptance Bank and Paul’s son, James Paul Warburg, was
Vice-President. Paul Warburg was also a director on other important acceptance
banks in this country, such as Westinghouse Acceptance Bank, which were
organized in the United States immediately after the World War, when the
headquarters of the international acceptance market was moved from London to
New York, and Paul Warburg became the most powerful acceptance banker in the
world.

Paul Warburg became an even more legendary figure by his memorialization as
"Daddy Warbucks" in the comic strip, "Little Orphan Annie". The strip
celebrated a homeless waif and her dog who are adopted by "the richest man in
the world", Daddy Warbucks, a takeoff on "Warburg", who has almost magical
powers and can accomplish anything by the power of his limitless wealth. Those
in the know snickered when "Annie", the musical comedy version of this story,
had a highly successful run of several years on Broadway, because the vast
majority of the audience had no idea that this was merely another Warburg
operation.

It was the transference of the acceptance market from England to this country
which gave rise to Thomas Lamont’s ecstatic speech before the Academy of
Political Science in 1917 that:

"The dollar, not the pound, is now the basis for international exchange."

Americans were proud to hear that, but they did not realize at what a price.

Visible proof of the undue influence of the American Acceptance Council on the
Federal Reserve Board, about which Congressman McFadden complained, is the
chart showing the rate-pattern of the
Federal Reserve Bank of New York during the 1920s. The Bank’s official
discount rate follows exactly for nine years the ninety-day bankers’
acceptance rate, and the Federal Reserve Bank of New York sets the discount
rate for the rest of the Reserve Banks.

Throughout the 1920s the Board of Governors retained two of its first members,
C.S. Hamlin and Adolph C. Miller. These men found themselves careers as
arbiters of the nation’s monetary policy. Hamlin was on the Board from 1914
until 1936, when he was appointed Special Counsel to the Board, while Miller
served from 1914 until 1931. These two men were allowed to stay on the Board
so many years because they were both eminently respectable men who gave the
Board a certain prestige in the eyes of the public. During these years one
important banker after another came on the Board, served for awhile, and went
on to better things. Neither Miller nor Hamlin ever objected to anything that
the New York bankers wanted. They changed the discount rate and they performed
open market operation with Government securities whenever Wall Street wanted
them to. Behind them was the figure of Paul Warburg, who exercised a
continuous and dominant influence as President of the Federal Advisory
Council, on which he had such men of common interests with himself as Winthrop
Aldrich and J.P. Morgan. Warburg was never too occupied with his duties of
organizing the big international trusts to supervise the nation’s financial
structures. His influence from 1902, when he arrived in this country as
immigrant from Germany, until 1932, the year of his death, was dependent on
his European alliance with the banking cartel. Warburg’s son, James Paul
Warburg, continued to exercise such influence, being appointed Franklin D.
Roosevelt’s Director of the Budget when that great man assumed office in 1933,
and setting up the Office of War Information, our official propaganda agency
during the Second World War.

In The Fight for Financial Supremacy, Paul Einzig, editorial writer for the
London Economist, wrote that:

"Almost immediately after World War I a close cooperation was established
between the Bank of England and the Federal Reserve authorities, and more
especially with the Federal Reserve Bank of New York.* This cooperation was
largely due to the cordial relations existing between Mr. Montagu Norman of
the Bank of England and Mr. Benjamin Strong, Governor of the Federal Reserve
Bank of New York until 1928. On several occasions the discount rate policy of
the Federal Reserve Bank of New York was guided by a desire to help the Bank
of England.

__________________________

* William Boyce Thompson (Wall Street operator) commented to Clarence Barron,
Nov. 27, 1920, "Why should the Federal Reserve Bank have private wires all
over the country and talk daily by cable with the Bank of England?" p. 327
"They Told Barron".

129

There has been close cooperation in the fixing of discount rates between
London and New

York."86
__________________________

86 Paul Einzig, The Fight For Financial Supremacy, Macmillan, 1931

130

CHAPTER ELEVEN

Lord Montagu Norman

Lord Montagu Norman

The collaboration between Benjamin Strong and Lord Montagu Norman is one of
the greatest secrets of the twentieth century. Benjamin Strong married the
daughter of the president of Bankers Trust in New York, and subsequently
succeeded to its presidency. Carroll Quigley, in Tragedy and Hope says:
"Strong became Governor of the Federal Reserve Bank of New York as the joint
nominee of Morgan and of Kuhn, Loeb Company in 1914."87

Lord Montagu Norman is the only man in history who had both his maternal
grandfather and his paternal grandfather serve as Governors of the Bank of
England. His father was with Brown, Shipley Company, the London Branch of
Brown Brothers (now Brown Brothers Harriman). Montagu Norman (1871-1950) came
to New York to work for Brown Brothers in 1894, where he was befriended by the
Delano family, and by James Markoe, of Brown Brothers. He returned to England,
and in 1907 was named to the Court of the Bank of England. In 1912, he had a
nervous breakdown, and went to Switzerland to be treated by Jung, as was
fashionable among the powerful group which he represented.*

Lord Montagu Norman was Governor of the Bank of England from 1916 to 1944.
During this period, he participated in the central bank conferences which set
up the Crash of 1929 and a worldwide depression. In The Politics of Money by
Brian Johnson, he writes, "Strong and Norman, intimate friends, spent their
holidays together at Bar Harbour and in the South of France." Johnson says,
"Norman therefore became Strong’s alter ego. . . . "Strong’s easy money
policies on the New York money market from 1925-28 were the fulfillment of his
agreement with Norman to keep New York interest rates below those of London.
For the sake of international cooperation, Strong withheld the steadying hand
of high interest rates from New York until it was too late. Easy money in New
__________________________

87 Carroll Quigley, Tragedy and Hope, Macmillan, New York, p. 326

* When people of this class are stricken by guilt feelings while plotting
world wars and economic depressions which will bring misery, suffering and
death to millions of the world’s inhabitants, they sometimes have qualms.
These qualms are jeered at by their peers as "a failure of nerve". After a
bout with their psychiatrists, they return to their work with renewed gusto,
with no further digressions of pity for "the little people" who are to be
their victims.
__________________________
York had encouraged the surging American boom of the late 1920s, with its
fantastic heights of speculation."

Benjamin Strong died suddenly in 1928. The New York Times obituary, Oct. 17,
1928, describes the conference between the directors of the three great
central banks in Europe in July, 1927, "Mr. Norman, Bank of England, Strong of
the New York Federal Reserve Bank, and Dr. Hjalmar Schacht of the Reichsbank,
their meeting referred to at the time as a meeting of ‘the world’s most
exclusive club’. No public reports were ever made of the foreign conferences,
which were wholly informal, but which covered many important questions of gold
movements, the stability of world trade, and world economy."

The meetings at which the future of the world’s economy are decided are always
reported as being "wholly informal", off the record, no reports made to the
public, and on the rare occasions when outraged Congressmen summon these
mystery figures to testify about their activities they merely trace the
outline of steps taken, and develop no information about what was really said
or decided.

At the Senate Hearings on the Federal Reserve System in 1931, H. Parker
Willis, one of the authors and First Secretary of the Federal Reserve Board
from 1914 until 1920, pointedly asked Governor George Harrison, Strong’s
successor as Governor of the Federal Reserve Bank of New York:
"What is the relationship between the Federal Reserve Bank of New York and the
money committee of the Stock Exchange?" "There is no relationship," Governor
Harrison replied. "There is no assistance or cooperation in fixing the rate in
any way?", asked Willis. "No," said Governor Harrison, "although on various
occasions they advise us of the state of the money situation, and what they
think the rate ought to be." This was an absolute contradiction of his
statement that "There is no relationship". The Federal Reserve Bank of New
York which set the discount rate for the other Reserve Banks, actually
maintained a close liaison with the money committee of the Stock Exchange.

The House Stabilization Hearings of 1928 proved conclusively that the
Governors of the Federal Reserve System had been holding conferences with
heads of the big European central banks. Even had the Congressmen known the
details of the plot which was to culminate in the Great Depression of 1929-31,
there would have been nothing they could have done to stop it. The
international bankers who controlled gold movements could inflict their will
on any country, and the United States was as helpless as any other.

MR. BEEDY: "I notice on your chart that the lines which produce the most
violent fluctuations are found under ‘Money Rates in New York.’ As the rates
of money rise and fall in the big cities the loans that are made on
investments seem to take advantage of them, at present, a quite violent
change, while industry in general does not seem to avail itself of these
violent changes, and that line is fairly even, there being no great rises or
declines.

GOVERNOR ADOLPH MILLER: This was all more or less in the interests of the
international situation. They sold gold credits in New York for sterling
balances in London.

REPRESENTATIVE STRONG: (No relation to Benjamin): Has the Federal Reserve
Board the power to attract gold to this country?

E.A. GOLDENWEISER, research director for the Board: The Federal Reserve Board
could attract gold to this country by making money rates higher.

GOVERNOR ADOLPH MILLER: I think we are very close to the point where any
further solicitude on our part for the monetary concerns of Europe can be
altered. The Federal Reserve Board last summer, 1927, set out by a policy of
open market purchases, followed in course by reduction on the discount rate at
the Reserve Banks, to ease the credit situation and to cheapen the cost of
money. The official reasons for that departure in credit policy were that it
would help to stabilize international exchange and stimulate the exportation
of gold.

CHAIRMAN MCFADDEN: Will you tell us briefly how that matter was brought to the
Federal Reserve Board and what were the influences that went into the final
determination?

GOVERNOR ADOLPH MILLER: You are asking a question impossible for me to answer.

CHAIRMAN MCFADDEN: Perhaps I can clarify it--where did the suggestion come
from that caused this decision of the change of rates last summer?

GOVERNOR ADOLPH MILLER: The three largest central banks in Europe had sent
representatives to this country. There were the Governor of the Bank of
England, Mr. Hjalmar Schacht, and Professor Rist, Deputy Governor of the Bank
of France. These gentlemen were in conference with officials of the Federal
Reserve Bank of New York. After a week or two, they appeared in Washington for
the better part of a day. They came down the evening of one day and were the
guests of the Governors of the Federal Reserve Board the following day, and
left that afternoon for New York.

CHAIRMAN MCFADDEN: Were the members of the Board present at this luncheon?

133

GOVERNOR ADOLPH MILLER: Oh, yes, it was given by the Governors of the Board
for the purpose of bringing all of us together.

CHAIRMAN MCFADDEN: Was it a social affair, or were matters of importance
discussed?

GOVERNOR MILLER: I would say it was mainly a social affair. Personally, I had
a long conversation with Dr. Schacht alone before the luncheon, and also one
of considerable length with Professor Rist. After the luncheon I began a
conversation with Mr. Norman, which was joined in by Governor Strong of New
York.

CHAIRMAN MCFADDEN: Was that a formal meeting of the Board?

GOVERNOR ADOLPH MILLER: No.

CHAIRMAN MCFADDEN: It was just an informal discussion of the matters they had
been discussing in New York?

GOVERNOR MILLER: I assume so. It was mainly a social occasion. What I said was
mainly in the nature of generalities. The heads of these central banks also
spoke in generalities.

MR. KING: What did they want?

GOVERNOR MILLER: They were very candid in answers to questions. I wanted to
have a talk with Mr. Norman, and we both stayed behind after luncheon, and
were joined by the other foreign representatives and the officials of the New
York Reserve Bank. These gentlemen were all pretty concerned with the way the
gold standard was working. They were therefore desirous of seeing an easy
money market in New York and lower rates, which would deter gold from moving
from Europe to this country. That would be very much in the interest of the
international money situation which then existed.

MR. BEEDY: Was there some understanding arrived at between the representatives
of these foreign banks and the Federal Reserve Board or the New York Federal
Reserve Bank?

GOVERNOR MILLER: Yes.

MR. BEEDY: It was not reported formally?

GOVERNOR MILLER: No. Later, there came a meeting of the Open-Market Policy
Committee, the investment policy committee of the Federal Reserve System, by
which and to which certain recommendations were made. My recollection is that
about eighty million dollars worth of securities were purchased in August
consistent with this plan.

CHAIRMAN MCFADDEN: Was there any conference between the members of the Open
Market Committee and those bankers from abroad?

GOVERNOR MILLER: They may have met them as individuals, but not as a
committee.

134
MR. KING: How does the Open-Market Committee get its ideas?

GOVERNOR MILLER: They sit around and talk about it. I do not know whose idea
this was. It was distinctly a time in which there was a cooperative spirit at
work.

CHAIRMAN MCFADDEN: You have outlined here negotiations of very great
importance.

GOVERNOR MILLER: I should rather say conversations.

CHAIRMAN MCFADDEN: Something of a very definite character took place?

GOVERNOR MILLER: Yes.

CHAIRMAN MCFADDEN: A change of policy on the part of our whole financial
system which has resulted in one of the most unusual situations that has ever
confronted this country financially (the stock market speculation boom of
1927-1929). It seems to me that a matter of that importance should have been
made a matter of record in Washington.

GOVERNOR MILLER: I agree with you.

REPRESENTATIVE STRONG: Would it not have been a good thing if there had been a
direction that those powers given to the Federal Reserve System should be used
for the continued stabilization of the purchasing power of the American dollar
rather than be influenced by the interests of Europe?

GOVERNOR MILLER: I take exception to that term "influence". Besides, there is
no such thing as stabilizing the American dollar without stabilizing every
other gold currency. They are tied together by the gold standard. Other
eminent men who come here are very adroit in knowing how to approach the folk
who make up the personnel of the Federal Reserve Board.

MR. STEAGALL: The visit of these foreign bankers resulted in money being
cheaper in New York?

GOVERNOR MILLER: Yes, exactly.

CHAIRMAN MCFADDEN: I would like to put in the record all who attended that
luncheon in Washington.

GOVERNOR MILLER: In addition to the names I have given you, there was also
present one of the younger men from the Bank of France. I think all members of
the Federal Reserve Board were there. Under Secretary of the Treasury Ogden
Mills was there, and the Assistant Secretary of the Treasury, Mr. Schuneman,
also, two or three men from the State Department and Mr. Warren of the Foreign
Department of the Federal Reserve Bank of New York. Oh yes, Governor Strong
was present.

135

CHAIRMAN MCFADDEN: This conference, of course, with all of these foreign
bankers did not just happen. The prominent bankers from Germany, France, and
England came here at whose suggestion?

GOVERNOR MILLER: A situation had been created that was distinctly embarrassing
to London by reason of the impending withdrawal of a certain amount of gold
which had been recovered by France and that had originally been shipped and
deposited in the Bank of England by the French Government as a war credit.
There was getting to be some tension of mind in Europe because France was
beginning to put her house in order for a return to the gold standard. This
situation was one which called for some moderating influence.

MR. KING: Who was the moving spirit who got those people together?

GOVERNOR MILLER: That is a detail with which I am not familiar.

REPRESENTATIVE STRONG: Would it not be fair to say that the fellows who wanted
the gold were the ones who instigated the meeting?

GOVERNOR MILLER: They came over here.

REPRESENTATIVE STRONG: The fact is that they came over here, they had a
meeting, they banqueted, they talked, they got the Federal Reserve Board to
lower the discount rate, and to make the purchases in the open market, and
they got the gold.

MR. STEAGALL: Is it true that action stabilized the European currencies and
upset ours?

GOVERNOR MILLER: Yes, that was what it was intended to do.

CHAIRMAN MCFADDEN: Let me call your attention to the recent conference in
Paris at which Mr. Goldenweiser, director of research for the Federal Reserve
Board, and Dr. Burgess, assistant Federal Reserve Agent of the Federal Reserve
Bank of New York, were in consultation with the representatives of the other
central banks. Who called the conference?

GOVERNOR MILLER: My recollection is that it was called by the Bank of France.

GOVERNOR YOUNG: No, it was the League of Nations who called them together."

The secret meeting between the Governors of the Federal Reserve Board and the
heads of the European central banks was not called to stabilize anything. It
was held to discuss the best way of getting the gold held in the United States
by the System back to Europe to force the nations of that continent back on
the gold standard. The League of Nations had not yet succeeded in doing that,
the objective for which that body was set up in the first place, because the
Senate of the United States
had refused to let Woodrow Wilson betray us to an international monetary
authority. It took the Second World War and Franklin D. Roosevelt to do that.
Meanwhile, Europe had to have our gold and the Federal Reserve System gave it
to them, five hundred million dollars worth. The movement of that gold out of
the United States caused the deflation of the stock boom, the end of the
business prosperity of the 1920s and the Great Depression of 1929-31, the
worst calamity which has ever befallen this nation. It is entirely logical to
say that the American people suffered that depression as a punishment for not
joining the League of Nations. The bankers knew what would happen when that
five hundred million dollars worth of gold was sent to Europe. They wanted the
Depression because it put the business and finance of the United States in
their hands.

The Hearings continue:

MR. BEEDY: "Mr. Ebersole of the Treasury Department concluded his remarks at
the dinner we attended last night by saying that the Federal Reserve System
did not want stabilization and the American businessman did not want it. They
want these fluctuations in prices, not only in securities but in commodities,
in trade generally, because those who are now in control are making their
profits out of that very instability. If control of these people does not come
in a legitimate way, there may be an attempt to produce it by general
upheavals such as have characterized society in days gone by. Revolutions have
been promoted by dissatisfaction with existing conditions, the control being
in the hands of the few, and the many paying the bills.

CHAIRMAN MCFADDEN: I have here a letter from a member of the Federal Reserve
Board who was summoned to appear here. I would like to have it put in the
record. It is from Governor Cunningham:
Dear Mr. Chairman:

For the past several weeks I have been confined to my home on account of
illness and am now preparing to spend a few weeks away from Washington for the
purpose of hastening convalescence.

Edward H. Cunningham

This is in answer to an invitation extended him to appear before our
Committee. I also have a letter from George Harrison, Deputy Governor of the
Federal Reserve Bank of New York.

My dear Mr. Congressman:

Governor Strong sailed for Europe last week. He had not been at all well since
the first of the year, and, while he did appear before your Committee last
March, it was only shortly after that that he suffered a very severe attack of
shingles, which has sorely racked his nerves. George L. Harrison, May 19, 1928

I also desire to place in the record a statement in the New York Journal of
Commerce, dated May 22, 1928, from Washington:

‘It is stated in well-informed circles here that the chief topic being taken
up by Governor Strong of the Federal Reserve Bank of New York on his present
visit to Paris is the arrangement of stabilization credits for France,
Rumania, and Yugoslavia. A second vital question Mr. Strong will take up is
the amount of gold France is to draw from this country.’"

Further questioning by Chairman McFadden about the strange illness of Benjamin
Strong brought forth the following testimony from Governor Charles S. Hamlin
of the Federal Reserve Board on May 23rd, 1928:

"All I know is that Governor Strong has been very ill, and he has gone over to
Europe primarily, I understand, as a matter of health. Of course, he knows
well the various offices of the European central banks and undoubtedly will
call on them."

Governor Benjamin Strong died a few weeks after his return from Europe,
without appearing before the Committee.

The purpose of these hearings before the House Committee on Banking and
Currency in 1928 was to investigate the necessity for passing the Strong bill,
presented by Representative Strong (no relation to Benjamin, the international
banker), which would have provided that the Federal Reserve System be
empowered to act to stabilize the purchasing power of the dollar. This had
been one of the promises made by Carter Glass and Woodrow Wilson when they
presented the Federal Reserve Act before Congress in 1912, and such a
provision had actually been put in the Act by Senator Robert L. Owen, but
Carter Glass’ House Committee on Banking and Currency had struck it out. The
traders and speculators did not want the dollar to become stable, because they
would no longer be able to make a profit. The citizens of this country had
been led to gamble on the stock market in the 1920s because the traders had
created a nationwide condition of instability.

The Strong Bill of 1928 was defeated in Congress.

The financial situation in the United States during the 1920s was
characterized by an inflation of speculative values only. It was a trader-made
situation. Prices of commodities remained low, despite the over-pricing of
securities on the exchange.

The purchasers did not expect their securities to pay dividends. The idea was
to hold them awhile and sell them at a profit. It had to stop somewhere, as
Paul Warburg remarked in March, 1929. Wall Street did not let it stop until
the people had put their savings into these over-priced securities. We had the
spectacle of the President of the United States, Calvin Coolidge, acting as a
shill for the stock market operators when he recommended to the American
people that they continue buying on the
market, in 1927. There had been uneasiness about the inflated condition of the
market, and the bankers showed their power by getting the President of the
United States, the Secretary of the Treasury, and the Chairman of the Board of
Governors of the Federal Reserve System to issue statements that brokers’
loans were not too high, and that the condition of the stock market was sound.

Irving Fisher warned us in 1927 that the burden of stabilizing prices all over
the world would soon fall on the United States. One of the results of the
Second World War was the establishment of an International Monetary Fund to do
just that. Professor Gustav Cassel remarked in the same year that:

"The downward movement of prices has not been a spontaneous result of forces
beyond our control. It is the result of a policy deliberately framed to bring
down prices and give a higher value to the monetary unit."

The Democratic Party, after passing the Federal Reserve Act and leading us
into the First World War, assumed the role of an opposition party during the
1920s. They were on the outside of the political fence, and were supported
during those lean years by liberal handouts from Bernard Baruch, according to
his biography. How far outside of it they were and how little chance they had
in 1928, is shown by a plank in the official Democratic Party platform adopted
at Houston on June 28, 1928:

"The administration of the Federal Reserve System for the advantage of the
stock-market speculators should cease. It must be administered for the benefit
of farmers, wage-earners, merchants, manufacturers, and others engaged in
constructive business."

This idealism insured defeat for its protagonist, Al Smith, who was nominated
by Franklin D. Roosevelt. The campaign against Al Smith also was marked by
appeals to religious intolerance, because he was a Catholic. The bankers
stirred up anti-Catholic sentiment all over the country to achieve the
election of their World War I protégé, Herbert Hoover.

Instead of being used to promote the financial stability of the country, as
had been promised by Woodrow Wilson when the Act was passed, financial
instability has been steadily promoted by the Federal Reserve Board. An
official memorandum issued by the Board on March 13, 1939, stated that:

"The Board of Governors of the Federal Reserve System opposes any bill which
proposes a stable price level."

Politically, the Federal Reserve Board was used to advance the election of the
bankers’ candidates during the 1920s. The "Literary Digest" on August 4, 1928,
said, on the occasion of the Federal Reserve Board raising the rate to five
percent in a Presidential year:

"This reverses the politically desirable cheap money policy of 1927, and gives
smooth conditions on the stock market. It was attacked by the Peoples’ Lobby
of Washington, D.C. which said that ‘This increase at a time when farmers
needed cheap money to finance the harvesting of their crops was a direct blow
at the farmers, who had begun to get back on their feet after the Agricultural
Depression of 1920-21.

"The New York World" said on that occasion:

"Criticism of Federal Reserve Board policy by many investors is not based on
its attempt todeflate the stock market, but on the charge that the Board
itself, by last year’s policy, is completely responsible for such stock market
inflation as exists."

A damning survey of the Federal Reserve System’s first fifteen years appears
in the "North American Review" of May, 1929, by H. Parker Willis, professional
economist who was one of the authors of the Act and First Secretary of the
Board from 1914 until 1920. He expresses complete disillusionment.

"My first talk with President-elect Wilson was in 1912. Our conversation
related entirely to banking reform. I asked whether he felt confident we could
secure the administration of a suitable law and how we should get it applied
and enforced. He answered: ‘We must rely on American business idealism.’ He
sought for something which could be trusted to afford opportunity to American
Idealism. It did serve to finance the World War and to revise American banking
practices. The element of idealism that the President prescribed and believed
we could get on the principle of noblesse oblige from American bankers and
businessmen was not there. Since the inauguration of the Federal Reserve Act
we have suffered one of the most serious financial depressions and revolutions
ever known in our history, that of 1920-21. We have seen our agriculture pass
through a long period of suffering and even of revolution, during which one
million farmers left their farms, due to difficulties with the price of land
and the odd status of credit conditions. We have suffered the most extensive
era of bank failures ever known in this country. Forty-five hundred banks have
closed their doors since the Reserve System began functioning. In some Western
towns there have been times when all banks in that community failed, and given
banks have failed over and over again. There has been little difference in
liability to failure between members and non-members of the Federal Reserve
System. "Wilson’s choice of the first members of the Federal Reserve Board was
not especially happy. They represented a composite group chosen for the
express purpose of placating this, that, or the other big interest. It was not
strange that appointees used their places to pay debts. When the Board was
considering a resolution to the effect that future members of the reserve
system should be appointed solely on merit, because of the demonstrated
incompetence of some of their number. Comptroller John Skelton Williams moved
to strike out the word ‘solely’ and in this he was sustained by the Board. The
inclusion of certain elements (Warburg,
Strauss, etc.) in the Board gave an opportunity for catering to special
interests that was to prove disastrous later on." President Wilson erred, as he
often erred, in supposing that the holding of an important office would
transform an incumbent and revivify his patriotism. The Reserve Board reached
the low ebb of the Wilson period with the appointment of a member who was
chosen for his ability to get delegates for a Democratic candidate for the
Presidency. However, this level was not the dregs reached under President
Harding. He appointed an old crony, D.R. Crissinger, as Governor of the Board,
and named several other super-serviceable politicians to other places. Before
his death he had done his utmost to debauch the whole undertaking. The System
has gone steadily downhill ever since.

"Reserve Banks had hardly assumed their first form when it became apparent
that local bankers had sought to use them as a means of taking care of
‘favorite sons’, that is, persons who had by common consent become a kind of
general charge upon the banking community, or inefficients of various kinds.
When reserve directors were to be chosen, the country bankers often refused to
vote, or, when they voted, cast their ballots as directed by city
correspondents. In these circumstances popular or democratic control of
reserve banks was out of the question. Reasonable efficiency might have been
secured if honest men, recognizing their public duty, had assumed power. If
such men existed, they did not get on the Federal Reserve Board. In one
reserve bank today the chief management is in the hands of a man who never did
a day’s actual banking in his life, while in another reserve institution both
Governor and Chairman are the former heads of now defunct banks. They
naturally have a high failure record in their district. In a majority of
districts the standard of performance as judged by good banking standards is
disgracefully low among reserve executive officials. The policy of the Federal
Reserve Bank of Philadelphia is known in the System as the ‘Friends and
Relatives Banks.’

"It was while making war profits in considerable amounts that someone
conceived the idea of using the profits to provide themselves with
phenomenally costly buildings. Today the Reserve Banks must keep a full
billion dollars of their money constantly at work merely to pay their own
expenses in normal times.

"The best illustration of what the System has done and not done is offered by
the experience which the country was having with speculation, in May, 1929.
Three years prior to that, the present bull market was just getting under way.
In the autumn of 1926 a group of bankers, among them one of world famous name,
were sitting at a table in a Washington hotel. One of them raised the question
whether the low discount rates of the System were not likely to encourage
speculation. "‘Yes’, replied the famous banker, ‘they will, but that cannot be
helped. It is the price we must pay for helping Europe.’

"It may well be questioned whether the encouragement of speculation by the
Board has been the price paid for helping Europe or whether
it is the price paid to induce a certain class of financiers to help Europe,
but in either case European conditions should not have had anything to do with
the Board’s discount policy. The fact of the matter is that the Federal
Reserve Banks do not come into contact with the community.

"The ‘small man’ from Maine to Texas has gradually been led to invest his
savings in the stock market, with the result that the rising tide of
speculation, transacted at a higher and higher rate of speed, has swept over
the legitimate business of the country.

"In March, 1928, Roy A. Young, Governor of the Board, was called before a
Senate committee.

‘Do you think the brokers’ loans are too high?", he was asked.

"‘I am not prepared to say whether brokers’ loans are too high or too low,’ he
replied, ‘but I am sure they are safely and conservatively made.’

"Secretary of the Treasury Mellon in a formal statement assured the country
that they were not too high, and Coolidge, using material supplied him by the
Federal Reserve Board, made a plain statement to the country that they were
not too high. The Federal Reserve Board, charged with the duty of protecting
the interests of the average man, thus did its utmost to assure the average
man that he should feel no alarm about his savings. Yet the Federal Reserve
Board issued on February 2, 1929, a letter addressed to the Reserve Bank
Directors cautioning them against grave danger of further speculation.

"What could be expected from a group of men such as composed the Board, a set
of men who were solely interested in standing from under when there was any
danger of friction, displaying a bovine and canine appetite for credit and
praise, while eager only to ‘stand in’ with the ‘big men’ whom they know as
the masters of American finance and banking?"

H. Parker Willis omitted any reference to Lord Montague Norman and the
machinations of the Bank of England which were about to result in the Crash of
1929 and the Great Depression.

142

CHAPTER TWELVE

The Great Depression

R.G. Hawtrey, the English economist, said, in the March, 1926 American
Economic Review:

"When external investment outstrips the supply of general savings the
investment market must carry the excess with money borrowed from the banks. A
remedy is control of credit by a rise in bank rate."

The Federal Reserve Board applied this control of credit, but not in 1926, nor
as a remedial measure. It was not applied until 1929, and then the rate was
raised as a punitive measure, to freeze out everybody but the big trusts.

Professor Cassel, in the Quarterly Journal of Economics, August 1928, wrote
that:

"The fact that a central bank fails to raise its bank rate in accordance with
the actual situation of the capital market very much increases the strength of
the cyclical movement of trade, with all its pernicious effects on social
economy. A rational regulation of the bank rate lies in our hands, and may be
accomplished only if we perceive its importance and decide to go in for such a
policy. With a bank rate regulated on these lines the conditions for the
development of trade cycles would be radically altered, and indeed, our
familiar trade cycles would be a thing of the past."

This is the most authoritative premise yet made relating that our business
depressions are artificially precipitated. The occurrence of the Panic of
1907, the Agricultural Depression of 1920, and the Great Depression of 1929,
all three in good crop years and in periods of national prosperity, suggests
that premise is not guesswork. Lord Maynard Keynes pointed out that most
theories of the business cycle failed to relate their analysis adequately to
the money mechanism. Any survey or study of a depression which failed to list
such factors as gold movements and pressures on foreign exchange would be
worthless, yet American economists have always dodged this issue.

The League of Nations had achieved its goal of getting the nations of Europe
back on the gold standard by 1928, but three-fourths of the world’s gold was
in France and the United States. The problem was how to get that gold to
countries which needed it as a basis for money and credit. The answer was
action by the Federal Reserve System.

143

Following the secret meeting of the Federal Reserve Board and the heads of the
foreign central banks in 1927, the Federal Reserve Banks in a few months
doubled their holdings of Government securities and acceptances, which
resulted in the exportation of five hundred million dollars in gold in that
year. The System’s market activities forced the rates of call money down on
the Stock Exchange, and forced gold out of the country. Foreigners also took
this opportunity to purchase heavily in Government securities because of the
low call money rate.

"The agreement between the Bank of England and the Washington Federal Reserve
authorities many months ago was that we would force the export of 725 million
of gold by reducing the bank rates here, thus helping the stabilization of
France and Europe and putting France on a gold basis."89 (April 20, 1928)

On February 6, 1929, Mr. Montagu Norman, Governor of the Bank of England, came
to Washington and had a conference with Andrew Mellon, Secretary of the
Treasury. Immediately after that mysterious visit, the Federal Reserve Board
abruptly changed its policy and pursued a high discount rate policy,
abandoning the cheap money policy which it had inaugurated in 1927 after Mr.
Norman’s other visit. The stock market crash and the deflation of the American
people’s financial structure was scheduled to take place in March. To get the
ball rolling, Paul Warburg gave the official warning to the traders to get out
of the market. In his annual report to the stockholders of his International
Acceptance Bank, in March, 1929, Mr. Warburg said:

"If the orgies of unrestrained speculation are permitted to spread, the
ultimate collapse is certain not only to affect the speculators themselves,
but to bring about a general depression involving the entire country."

During three years of "unrestrained speculation", Mr. Warburg had not seen fit
to make any remarks about the condition of the Stock Exchange. A friendly
organ, The New York Times, not only gave the report two columns on its
editorial page, but editorially commented on the wisdom and profundity of Mr.
Warburg’s observations. Mr. Warburg’s concern was genuine, for the stock
market bubble had gone much farther than it had been intended to go, and the
bankers feared the consequences if the people realized what was going on. When
this report in The New York Times started a sudden wave of selling on the
Exchange, the bankers grew panicky, and it was decided to ease the market
somewhat. Accordingly, Warburg’s National City Bank rushed twenty-five million
dollars in cash to the call money market, and postponed the day of the crash.

The revelation of the Federal Reserve Board’s final decision to trigger the
Crash of 1929 appears, amazingly enough, in The New York Times. On April 20,
1929, the Times headlined, "Federal Advisory Council Mystery
__________________________

Meeting in Washington. Resolutions were adopted by the council and transmitted
to the board, but their purpose was closely guarded. An atmosphere of deep
mystery was thrown about the proceedings both by the board and the council.
Every effort was made to guard the proceedings of this extraordinary session.
Evasive replies were given to newspaper correspondents."

Only the innermost council of "The London Connection" knew that it had been
decided at this "mystery meeting" to bring down the curtain on the greatest
speculative boom in American history. Those in the know began to sell off all
speculative stocks and put their money in government bonds. Those who were not
privy to this secret information, and they included some of the wealthiest men
in America, continued to hold their speculative stocks and lost everything
they had.

In FDR, My Exploited Father-in-Law, Col. Curtis B. Dall, who was a broker on
Wall Street at that time, writes of the Crash, "Actually it was the calculated
‘shearing’ of the public by the World Money-Powers, triggered by the planned
sudden shortage of the supply of call money in the New York money market."90
Overnight, the Federal Reserve System had raised the call rate to twenty
percent. Unable to meet this rate, the speculators’ only alternative was to
jump out of windows.

The New York Federal Reserve Bank rate, which dictated the national interest
rate, went to six percent on November 1, 1929. After the investors had been
bankrupted, it dropped to one and one-half percent on May 8, 1931. Congressman
Wright Patman in "A Primer On Money", says that the money supply decreased by
eight billion dollars from 1929 to 1933, causing 11,630 banks of the total of
26,401 in the United States to go bankrupt and close their doors.

The Federal Reserve Board had already warned the stockholders of the Federal
Reserve Banks to get out of the Market, on February 6, 1929, but it had not
bothered to say anything to the rest of the people. Nobody knew what was going
on except the Wall Street bankers who were running the show. Gold movements
were completely unreliable. The Quarterly Journal of Economics noted that:

"The question has been raised, not only in this country, but in several
European countries, as to whether customs statistics record with accuracy the
movements of precious metals, and, when investigation has been made,
confidence in such figures has been weakened rather than strengthened. Any
movement between France and England, for instance, should be recorded in each
country, but such comparison shows an average yearly discrepancy of fifty
million francs for France and eighty-five million francs for England. These
enormous discrepancies are not accounted for."

"Study of the relations between changes in gold stock and movement in price
levels shows what should be very obvious, but is by no means recognized, that
the gold standard is in no sense automatic in operation. The gold standard can
be, and is, usefully managed and controlled for the benefit of a small group
of international traders."

In August 1929, the Federal Reserve Board raised the rate to six percent. The
Bank of England in the next month raised its rate from five and one-half
percent to six and one-half percent. Dr. Friday in the September, 1929, issue
of Review of Reviews, could find no reason for the Board’s action:

"The Federal Reserve statement for August 7, 1929, shows that signs of
inadequacy for autumn requirements do not exist. Gold resources are
considerably more than the previous year, and gold continues to move in, to
the financial embarrassment of Germany and England. The reasons for the
Board’s action must be sought elsewhere. The public has been given only the
hint that ‘This problem has presented difficulties because of certain peculiar
conditions’. Every reason which Governor Young advanced for lowering the bank
rate last year exists now. Increasing the rate means that not only is there
danger of drawing gold from abroad, but imports of the yellow metal have been
in progress for the last four months. To do anything to accentuate this is to
take the responsibility for bringing on a world-wide credit deflation."

Thus we find that not only was the Federal Reserve System responsible for the
First World War, which it made possible by enabling the United States to
finance the Allies, but its policies brought on the world-wide depression of
1929-31. Governor Adolph C. Miller stated at the Senate Investigation of the
Federal Reserve Board in 1931 that:

"If we had had no Federal Reserve System, I do not think we would have had as
bad a speculative situation as we had, to begin with."

Carter Glass replied, "You have made it clear that the Federal Reserve Board
provided a terrific credit expansion by these open market transactions."

Emmanuel Goldenweiser said, "In 1928-29 the Federal Board was engaged in an
attempt to restrain the rapid increase in security loans and in stock market
speculation. The continuity of this policy of restraint, however, was
interrupted by reduction in bill rates in the autumn of 1928 and the summer of
1929."

Both J.P. Morgan and Kuhn, Loeb Co. had "preferred lists" of men to whom they
sent advance announcements of profitable stocks. The men on these preferred
lists were allowed to purchase these stocks at cost, that is, anywhere from 2
to 15 points a share less than they were sold to the public. The men on these
lists were fellow bankers, prominent industrialists, powerful city
politicians, national Committeemen of the Republican and Democratic Parties,
and rulers of foreign countries. The men on these lists were notified of the
coming crash, and sold all but so-called gilt-edged stocks, General Motors,
Dupont, etc. The prices on these stocks also sank to record lows, but they
came up soon afterwards. How the big bankers operated in
1929 is revealed by a Newsweek story on May 30, 1936, when a Roosevelt
appointee, Ralph W. Morrison, resigned from the Federal Reserve Board:

"The consensus of opinion is that the Federal Reserve Board has lost an able
man. He sold his Texas utilities stock to Insull for ten million dollars, and
in 1929 called a meeting and ordered his banks to close out all security loans
by September 1. As a result, they rode through the depression with flying
colors."

Predictably enough, all of the big bankers rode through the depression "with
flying colors." The people who suffered were the workers and farmers who had
invested their money in get-rich stocks, after the President of the United
States, Calvin Coolidge, and the Secretary of the Treasury, Andrew Mellon, had
persuaded them to do it.

There had been some warnings of the approaching crash in England, which
American newspapers never saw. The London Statist on May 25, 1929 said:

"The banking authorities in the United States apparently want a business panic
to curb speculation."

The London Economist on May 11, 1929, said:

"The events of the past year have seen the beginnings of a new technique,
which, if maintained and developed, may succeed in ‘rationing the speculator
without injuring the trader.’"

Governor Charles S. Hamlin quoted this statement at the Senate hearings in
1931 and said, in corroboration of it:

"That was the feeling of certain members of the Board, to remove Federal
Reserve credit from the speculator without injuring the trader."

Governor Hamlin did not bother to point out that the "speculators" he was out
to break were the school-teachers and small town merchants who had put their
savings into the stock market, or that the "traders" he was trying to protect
were the big Wall Street operators, Bernard Baruch and Paul Warburg.

When the Federal Reserve Bank of New York raised its rate to six percent on
August 9, 1929, market conditions began which culminated in tremendous selling
orders from October 24 into November, which wiped out a hundred and sixty
billion dollars worth of security values. That was a hundred and sixty
billions which the American citizens had one month and did not have the next.
Some idea of the calamity may be had if we remember that our enormous outlay
of money and goods in the Second World War amounted to not much more than two
hundred billions of dollars, and a great deal of that remained as negotiable
securities in the national debt. The stock market crash is the greatest
misfortune which the United States has ever suffered.

The Academy of Political Science of Columbia University in its annual meeting
in January, 1930, held a post-mortem on the Crash of 1929. Vice
President Paul Warburg was to have presided, and Director Ogden Mills was to
have played an important part in the discussion. However, these two gentlemen
did not show up. Professor Oliver M.W. Sprague of Harvard University remarked
of the crash:

"We have here a beautiful laboratory case of the stock market’s dropping
apparently from its own weight."

It was pointed out that there was no exhaustion of credit, as in 1893, nor any
currency famine, as in the Panic of 1907, when clearing-house certificates
were resorted to, nor a collapse of commodity prices, as in 1920. What then,
had caused the crash? The people had purchased stocks at high prices and
expected the prices to continue to rise. The prices had to come down, and they
did. It was obvious to the economists and bankers gathered over their brandy
and cigars at the Hotel Astor that the people were at fault. Certainly the
people had made a mistake in buying over-priced securities, but they had been
talked into it by every leading citizen from the President of the United
States on down. Every magazine of national circulation, every big newspaper,
and every prominent banker, economist, and politician, had joined in the big
confidence game of urging people to buy those over-priced securities. When the
Federal Reserve Bank of New York raised its rate to six percent, in August
1929, people began to get out of the market, and it turned into a panic which
drove the prices of securities down far below their natural levels. As in
previous panics, this enabled both Wall Street and foreign operators in the
know to pick up "blue-chip" and gilt-edged" securities for a fraction of their
real value.

The Crash of 1929 also saw the formation of giant holding companies which
picked up these cheap bonds and securities, such as the Marine Midland
Corporation, the Lehman Corporation, and the Equity Corporation. In 1929 J.P.
Morgan Company organized the giant food trust, Standard Brands. There was an
unequaled opportunity for trust operators to enlarge and consolidate their
holdings.

Emmanuel Goldenweiser, director of research for the Federal Reserve System,
said, in 1947:

"It is clear in retrospect that the Board should have ignored the speculative
expansion and allowed it to collapse of its own weight."

This admission of error eighteen years after the event was small comfort to
the people who lost their savings in the Crash.

The Wall Street Crash of 1929 was the beginning of a world-wide credit
deflation which lasted through 1932, and from which the Western democracies
did not recover until they began to rearm for the Second World War. During
this depression, the trust operators achieved further control by their backing
of three international swindlers, The Van Sweringen brothers, Samuel Insull,
and Ivar Kreuger. These men pyramided billions of dollars worth of securities
to fantastic heights. The bankers who promoted
them and floated their stock issue could have stopped them at any time, by
calling loans of less than a million dollars, but they let these men go on
until they had incorporated many industrial and financial properties into
holding companies, which the banks then took over for nothing. Insull piled up
public utility holdings throughout the Middle West, which the banks got for a
fraction of their worth. Ivar Kreuger was backed by Lee Higginson Company,
supposedly one of the nation’s most reputable banking houses. The Saturday
Evening Post called him "more than a financial titan", and the English review
Fortnightly said, in an article written December 1931, under the title, "A
Chapter in Constructive Finance": "It is as a financial irrigator that Kreuger
has become of such vital importance to Europe."*

"Financial irrigator" we may remember, was the title bestowed upon Jacob
Schiff by Newsweek Magazine, when it described how Schiff had bought up
American railroads with Rothschild’s money.

The New Republic remarked on January 25th, 1933, when it commented on the fact
that Lee Higginson Company had handled Kreuger and Toll Securities on the
American market:

"Three-quarters of a billion dollars was made away with. Who was able to
dictate to the French police to keep secret the news of this extremely
important suicide for some hours, during which somebody sold Kreuger
securities in large amounts, thus getting out of the market before the
debacle?"

The Federal Reserve Board could have checked the enormous credit expansion of
Insull and Kreuger by investigating the security on which their loans were
being made, but the Governors never made any examination of the activities of
these men.

The modern bank with the credit facilities it affords, gives an opportunity
which had not previously existed for such operators as Kreuger to make an
appearance of abundant capital by the aid of borrowed capital. This enables
the speculator to buy securities with securities. The only limit to the amount
he can corner is the amount to which the banks will back him, and, if a
speculator is being promoted by a reputable banking house, as Kreuger was
promoted by Lee Higginson Company, the only way he could be stopped would be
by an investigation of his actual financial resources, which in Kreuger’s case
would have proved to be nil.

The leader of the American people during the Crash of 1929 and the subsequent
depression was Herbert Hoover. After the first break of the
__________________________
* NOTE: Ivar Kreuger, we may recall, was occasionally the personal guest of
his old friend, President Herbert Hoover, at the White House. Hoover seems to
have maintained a cordial relationship with many of the most prominent
swindlers of the twentieth century, including his partner, Emile Francqui. The
receivership of the billion dollar Kreuger Fraud was handled by Samuel
Untermeyer, former counsel for Pujo Committee hearings.

__________________________

market (the five billion dollars in security values which disappeared on
October 24, 1929) President Hoover said:

"The fundamental business of the country, that is, production and distribution
of commodities, is on a sound and prosperous basis."

His Secretary of the Treasury, Andrew Mellon, stated on December 25, 1929,
that:

"The Government’s business is in sound condition."

His own business, the Aluminum Company of America, apparently was not doing so
well, for he had reduced the wages of all employees by ten percent.

The New York Times reported on April 7, 1931, "Montagu Norman, Governor of the
Bank of England, conferred with the Federal Reserve Board here today. Mellon,
Meyer, and George L. Harrison, Governor of the Federal Reserve Bank of New
York, were present."

The London Connection had sent Norman over this time to ensure that the Great
Depression was proceeding according to schedule. Congressman Louis McFadden
had complained, as reported in The New York Times, July 4, 1930, "Commodity
prices are being reduced to 1913 levels. Wages are being reduced by the labor
surplus of four million unemployed. The Morgan control of the Federal Reserve
System is exercised through control of the Federal Reserve Bank of New York,
the mediocre representation and acquiescence of the Federal Reserve Board in
Washington." As the depression deepened, the trust’s lock on the American
economy strengthened, but no finger was pointed at the parties who were
controlling the system.

150

CHAPTER THIRTEEN

The 1930’s

In 1930 Herbert Hoover appointed to the Federal Reserve Board an old friend
from World War I days, Eugene Meyer, Jr., who had a long record of public
service dating from 1915, when he went into partnership with Bernard Baruch in
the Alaska-Juneau Gold Mining Company. Meyer had been a Special Advisor to the
War Industries Board on Non-Ferrous Metals (gold, silver, etc.); Special
Assistant to the Secretary of War on aircraft production; in 1917 he was
appointed to the National Committee on War Savings, and was made Chairman of
the War Finance Corporation from 1918-1926. He then was appointed chairman of
the Federal Farm Loan Board from 1927-29. Hoover put him on the Federal
Reserve Board in 1930, and Franklin D. Roosevelt created the Reconstruction
Bank for Reconstruction and Development in 1946. Meyer must have been a man of
exceptional ability to hold so many important posts. However, there were some
Senators who did not believe he should hold any Government office, because of
his family background as an international gold dealer and his mysterious
operations in billions of dollars of Government securities in the First World
War. Consequently, the Senate held Hearings to determine whether Meyer ought
to be on the Federal Reserve Board.

At these Hearings, Representative Louis T. McFadden, Chairman of the House
Banking and Currency Committee, said:

"Eugene Meyer, Jr. has had his own crowd with him in the government since he
started in 1917. His War Finance Corporation personnel took over the Federal
Farm Loan System, and almost immediately afterwards, the Kansas City Join
Stock Land Bank and the Ohio Joint Stock Land Bank failed."

REPRESENTATIVE RAINEY: Mr. Meyer, when he nominally resigned as head of the
Federal Farm Loan Board, did not really cease his activities there. He left
behind him an able body of wreckers. They are continuing his policies and
consulting with him. Before his appointment, he was frequently in consultation
with Assistant Secretary of the Treasury Dewey. Just before his appointment,
the Chicago Joint Land Stock Bank, the Dallas Joint Stock Land Bank, the
Kansas City Joint Land Stock Bank, and the Des Moines Land Bank were all
functioning. Their bonds
were selling at par. The then farm commissioner had an understanding with
Secretary Dewey that nothing would be done without the consent and approval of
the Federal Farm Loan Board. A few days afterwards, United States Marshals,
with pistols strapped at their sides, and sometimes with drawn pistols,
entered these five banks and demanded that the banks be turned over to them.
Word went out all over the United States, through the newspapers, as to what
had happened, and these banks were ruined. This led to the breach with the old
Federal Farm Loan Board, and to the resignation of three of its members, and
the appointment of Mr. Meyer to be head of that Board.

SENATOR CAREY: Who authorized the marshals to take over the banks?

REP. RAINEY: Assistant Secretary of the Treasury Dewey. That started the ruin
of all these rural banks, and the Gianninis bought them up in great numbers."

World’s Work of February 1931, said:

"When the World War began for us in 1917, Mr. Eugene Meyer, Jr. was among the
first to be called to Washington. In April, 1918, President Wilson named him
Director of the War Finance Corporation. This corporation loaned out 700
million dollars to banking and financial institutions."

The Senate Hearings on Eugene Meyer, Jr. continued:

REPRESENTATIVE MCFADDEN: "Lazard Freres, the international banking house of
New York and Paris, was a Meyer family banking house. It frequently figures in
imports and exports of gold, and one of the important functions of the Federal
Reserve System has to do with gold movements in the maintenance of its own
operations. In looking over the minutes of the hearing we had last Thursday,
Senator Fletcher had asked Mr. Meyer, ‘Have you any connections with
international banking?’ Mr. Meyer had answered, ‘Me? Not personally.’ This
last question and answer do not appear in the stenographic transcript. Senator
Fletcher remembers asking the question and the answer. It is an odd omission.

SENATOR BROOKHART: I understand that Mr. Meyer looked it over for corrections.

REPRESENTATIVE MCFADDEN: Mr. Meyer is a brother-in-law of George Blumenthal, a
member of the firm of J.P. Morgan Company, which represents the Rothschild
interests. He also is a liaison officer between the French Government and J.P.
Morgan. Edmund Platt, who had eight years to go on a term of ten years as
Governor of the Federal Reserve Board, resigned to make room for Mr. Meyer.
Platt was given a Vice-Presidency of Marine Midland Corporation by Meyer’s
brother-in-law Alfred A. Cook. Eugene Meyer, Jr. as head of the War Finance
Corporation, engaged in the placing of two billion dollars in Government
securities, placed many of those orders first with the banking house now
located at 14 Wall Street in the name of Eugene Meyer, Jr. Mr. Meyer is now a
large stockholder in the Allied Chemical Corporation. I call your attention to
House Report No. 1635, 68th Congress, 2nd Session, which reveals that at least
twenty-four million dollars in bonds were duplicated. Ten billion dollars
worth of bonds surreptitiously destroyed. Our committee on Banking and
Currency found the records of the War Finance Corporation under Eugene Meyer,
Jr. extremely faulty. While the books were being brought before our committee
by the people who were custodians of them and taken back to the Treasury at
night, the committee discovered that alterations were being made in the
permanent records."

The record of public service did not prevent Eugene Meyer, Jr. from continuing
to serve the American people on the Federal Reserve Board, as Chairman of the
Reconstruction Finance Corporation, and as head of the International Bank.

President Rand, of the Marine Midland Corporation, questioned about his sudden
desire for the services of Edmund Platt, said:

"We pay Mr. Platt $22,000 a year, and we took his secretary over, of course."
This meant another five thousand a year.

Senator Brookhart showed that Eugene Meyer, Jr. administered the Federal Farm
Loan Board against the interests of the American farmer, saying:

"Mr. Meyer never loaned more than 180 million dollars of the capital stock of
500 million dollars of the farm loan board, so that in aiding the farmers he
was not even able to use half of the capital."

MR. MEYER: Senator Kenyon wrote me a letter which showed that I cooperated
with great advantage to the people of Iowa.

SENATOR BROOKHART: "You went out and took the opposite side from the Wall
Street crowd. They always send somebody out to do that. I have not yet
discovered in your statements much interest in making loans to the farmers at
large, or any real effort to help their condition. In your two years as head
of the Federal Farm Loan Board you made very few loans compared to your
capital. You loaned only one-eighth of the demand, according to your own
statement."

Despite the damning evidence uncovered at these Senate Hearings, Eugene Meyer,
Jr. remained on the Federal Reserve Board.

During this tragic period, chairman Louis McFadden of the House Banking and
Currency Committee continued his lone crusade against the "London Connection"
which had wrecked the nation. On June 10, 1932, McFadden addressed the House
of Representatives:

"Some people think the Federal Reserve banks are United States Government
institutions. They are not government institutions. They are private credit
monopolies which prey upon the people of the Unite
States for the benefit of themselves and their foreign customers. The Federal
Reserve banks are the agents of the foreign central banks. Henry Ford has
said, ‘The one aim of these financiers is world control by the creation of
inextinguishable debts.’ The truth is the Federal Reserve Board has usurped
the Government of the United States by the arrogant credit monopoly which
operates the Federal Reserve Board and the Federal Reserve Banks."

On January 13, 1932, McFadden had introduced a resolution indicting the
Federal Reserve Board of Governors for "Criminal Conspiracy":

"Whereas I charge them, jointly and severally, with the crime of having
treasonably conspired and acted against the peace and security of the United
States and having treasonably conspired to destroy constitutional government
in the United States. Resolved, that the Committee on the Judiciary is
authorized and directed as a whole or by subcommittee to investigate the
official conduct of the Federal Reserve Board and agents to determine whether,
in the opinion of the said committee, they have been guilty of any high crime
or misdemeanour which in the contemplation of the Constitution requires the
interposition of the Constitutional powers of the House."

No action was taken on this Resolution. McFadden came back on December 13,
1932 with a motion to impeach President Herbert Hoover. Only five Congressmen
stood with him on this, and the resolution failed. The Republican majority
leader of the House remarked, "Louis T. McFadden is now politically dead."

On May 23, 1933, McFadden introduced House Resolution No. 158, Articles of
Impeachment against the Secretary of the Treasury, two Assistant Secretaries
of the Treasury, the Federal Reserve Board of Governors, and officers and
directors of the Federal Reserve Banks for their guilt and collusion in
causing the Great Depression. "I charge them with having unlawfully taken over
80 billion dollars from the United States Government in the year 1928, the
said unlawful taking consisting of the unlawful recreation of claims against
the United States Treasury to the extent of over 80 billion dollars in the
year 1928, and in each year subsequent, and by having robbed the United States
Government and the people of the United States by their theft and sale of the
gold reserve of the United States."

The Resolution never reached the floor. A whispering campaign that McFadden
was insane swept Washington, and in the next Congressional elections, he was
overwhelmingly defeated by thousands of dollars poured into his home district
of Canton, Pennsylvania.

In 1932, the American people elected Franklin D. Roosevelt President of the
United States. This was hailed as the freeing of the American people from the
evil influence which had brought on the Great Depression, the ending of Wall Street domination, and the disappearance of the
banker from Washington.

Roosevelt owed his political career to a fortuitous circumstance. As Assistant
Secretary of the Navy during World War I, because of old school ties, he had
intervened to prevent prosecution of a large ring of homosexuals in the Navy
which included several Groton and Harvard chums. This brought him to the
favorable appreciation of a wealthy international homosexual set which
travelled back and forth between New York and Paris, and which was presided
over by Bessie Marbury, of a very old and prominent New York family. Bessie’s
"wife", who lived with her for a number of years, was Elsie de Wolfe, later
Lady Mendl in a "mariage de convenance", the arbiter of the international set.
They recruited J.P. Morgan’s youngest daughter, Anne Morgan, into their
circle, and used her fortune to restore the Villa Trianon in Paris, which
became their headquarters. During World War I, it was used as a hospital.
Bessie Marbury expected to be awarded the Legion of Honor by the French
Government as a reward, but J.P. Morgan, Jr., who despised her for corrupting
his youngest sister, requested the French Government to withhold the award,
which they did. Smarting from this rebuff, Bessie Marbury threw herself into
politics, and became a power in the Democratic National Party. She had also
recruited Eleanor Roosevelt into her circle, and, during a visit to Hyde Park,
Eleanor confided that she was desperate to find something for "poor Franklin"
to do, as he was confined to a wheelchair, and was very depressed.

"I know what we’ll do," exclaimed Bessie, "We’ll run him for Governor of New
York!" Because of her power, she succeeded in this goal, and Roosevelt later
became President.

One of the men Roosevelt brought down from New York with him as a Special
Advisor to the Treasury was Earl Bailie of J & W Seligman Company, who had
become notorious as the man who handed the $415,000 bribe to Juan Leguia, son
of the President of Peru, in order to get the President to accept a loan from
J & W Seligman Company. There was a great deal of criticism of this
appointment, and Mr. Roosevelt, in keeping with his new role as defender of
the people, sent Earl Bailie back to @bringing in New York.

Franklin D. Roosevelt himself was an international banker of ill repute,
having floated large issues of foreign bonds in this country in the 1920s.
These bonds defaulted, and our citizens lost millions of dollars, but they
still wanted Mr. Roosevelt as President. The New York Directory of Directors
lists Mr. Roosevelt as President and Director of United European Investors,
Ltd., in 1923 and 1924, which floated many millions of German marks in this
country, all of which defaulted. Poor’s Directory of Directors lists him as a
director of The International Germanic Trust Company in 1928. Franklin D.
Roosevelt was also an advisor to the
Federal International Banking Corporation, an Anglo-American outfit dealing in
foreign securities in the United States.

Roosevelt’s law firm of Roosevelt and O’Connor during the 1920s represented
many international corporations. His law partner, Basil O’Connor, was a
director in the following corporations:

Cuban-American Manganese Corporation, Venezuela-Mexican Oil Corporation, West
Indies Sugar Corporation, American Reserve Insurance Corporation, Warm Springs
Foundation. He was director in other corporations, and later head of the
American Red Cross.

When Franklin D. Roosevelt took office as President of the United States, he
appointed as Director of the Budget James Paul Warburg, son of Paul Warburg,
and Vice President of the International Acceptance Bank and other
corporations. Roosevelt appointed as Secretary of the Treasury W.H. Woodin,
one of the biggest industrialists in the country, Director of the American Car
Foundry Company and numerous other locomotive works, Remington Arms, The Cuba
Company, Consolidated Cuba Railroads, and other big corporations. Woodin was
later replaced by Henry Morgenthau, Jr., son of the Harlem real estate
operator who had helped put Woodrow Wilson in the White House. With such a
crew as this, Roosevelt’s promises of radical social changes showed little
likelihood of fulfillment. One of the first things he did was to declare a
bankers’ moratorium, to help the bankers get their records in order.

World’s Work says:

"Congress has left Charles G. Dawes and Eugene Meyer, Jr. free to appraise, by
their own methods, the security which prospective borrowers of the two billion
dollar capital may offer."

Roosevelt also set up the Securities Exchange Commission, to see to it that no
new faces got into the Wall Street gang, which caused the following colloquy
in Congress:

REPRESENTATIVE WOLCOTT: At hearings before this committee in 1933, the
economists showed us charts which proved beyond all doubt that the dollar
value commodities followed the price level of gold. It did not, did it?

LEON HENDERSON: No.

REPRESENTATIVE GIFFORD: Wasn’t Joe Kennedy put in [as Chairman of the
Securities Exchange Committee] by President Roosevelt because he was
sympathetic with big business?

LEON HENDERSON: I think so.

Paul Einzig pointed out in 1935 that:

"President Roosevelt was the first to declare himself openly in favor of a
monetary policy aiming at a deliberately engineered rise in prices. In a
negative sense his policy was successful. Between 1933 and 1935 he succeeded
in reducing private indebtedness, but this was done at the cost of increasing
public indebtedness."

In other words, he eased the burden of debts off of the rich onto the poor,
since the rich are few and the poor many.

Senator Robert L. Owen, testifying before the House Committee on Banking and
Currency in 1938, said:

"I wrote into the bill which was introduced by me in the Senate on June 26,
1913, a provision that the powers of the System should be employed to promote
a stable price level, which meant a dollar of stable purchasing, debt-paying
power. It was stricken out. The powerful money interests got control of the
Federal Reserve Board through Mr. Paul Warburg, Mr. Albert Strauss, and Mr.
Adolph C. Miller and they were able to have that secret meeting of May 18,
1920, and bring about a contraction of credit so violent it threw five million
people out of employment. In 1920 that Reserve Board deliberately caused the
Panic of 1921. The same people, unrestrained in the stock market, expanding
credit to a great excess between 1926 and 1929, raised the price of stocks to
a fantastic point where they could not possibly earn dividends, and when the
people realized this, they tried to get out, resulting in the Crash of October
24, 1929."

Senator Owen did not go into the question of whether the Federal Reserve Board
could be held responsible to the public. Actually, they cannot. They are
public officials who are appointed by the President, but their salaries are
paid by the private stockholders of the Federal Reserve Banks.

"The Federal Reserve Bank is an institution owned by the stockholding member
banks. The Government has not a dollar’s worth of stock in it."

However, the Government does give the Federal Reserve System the use of its
billions of dollars of credit, and this gives the Federal Reserve its
characteristic of a central bank, the power to issue currency on the
Government’s credit. We do not have Federal Government notes or gold
certificates as currency. We have Federal Reserve Bank notes, issued by the
Federal Reserve Banks, and every dollar they print is a dollar in their
pocket.

W. Randolph Burgess, of the Federal Reserve Bank of New York, stated before
the Academy of Political Science in 1930 that:

"In its major principles of operation the Federal Reserve System is no
different from other banks of issue, such as the Bank of England, the Bank of
France, or the Reichsbank."

157

All of these central banks have the power of issuing currency in their
respective countries. Thus, the people do not own their own money in Europe,
nor do they own it here. It is privately printed for private profit. The
people have no sovereignty over their money, and it has developed that they
have no sovereignty over other major political issues such as foreign policy.

As a central bank of issue, the Federal Reserve System has behind it all the
enormous wealth of the American people. When it began operations in 1913, it
created a serious threat to the central banks of the impoverished countries of
Europe. Because it represented this great wealth, it attracted far more gold
than was desirable in the 1920s, and it was apparent that soon all of the
world’s gold would be piled up in this country. This would make the gold
standard a joke in Europe, because they would have no gold over there to back
their issue of money and credit. It was the Federal Reserve’s avowed aim in
1927, after the secret meeting with the heads of the foreign central banks, to
get large quantities of that gold sent back to Europe, and its methods of
doing so, the low interest rate and heavy purchases of Government securities,
which created vast sums of new money, intensified the stock market speculation
and made the stock market crash and resultant depression a national disaster.

Since the Federal Reserve System was guilty of causing this disaster, we might
suppose that they would have tried to alleviate it. However, through the dark
years of 1931 and 1932, the Governors of the Federal Reserve Board saw the
plight of the American people worsening and did nothing to help them. This was
more criminal than the original plotting of the Depression. Anyone who lived
through those years in this country remembers the widespread unemployment, the
misery, and the hunger of our people. At any time during those years the
Federal Reserve Board could have acted to relieve this situation.

The problem was to get some money back into circulation. So much of the money
normally used to pay rent and food bills had been sucked into Wall Street that
there was no money to carry on the business of living. In many areas, people
printed their own money on wood and paper for use in their communities, and
this money was good, since it represented obligations to each other which
people fulfilled.

The Federal Reserve System was a central bank of issue. It had the power to,
and did, when it suited its owners, issue millions of dollars of money. Why
did it not do so in 1931 and 1932? The Wall Street bankers were through with
Mr. Herbert Hoover, and they wanted Franklin D. Roosevelt to come in on a wave
of glory as the saviour of the nation. Therefore, the American people had to
starve and suffer until March of 1933, when the White Knight came riding in
with his crew of Wall Street
bribers and put some money into circulation. That was all there was to it. As
soon as Mr. Roosevelt took office, the Federal Reserve began to buy Government
securities at the rate of ten million dollars a week for ten weeks, and
created a hundred million dollars in new money, which alleviated the critical
famine of money and credit, and the factories started hiring people again.

During the Roosevelt Administration, The Federal Reserve Board, insofar as the
public was concerned, was Marriner Eccles, an emulator and admirer of "the
Chief". Eccles was a Utah banker, President of the First Securities
Corporation, a family investment trust consisting of a number of banks which
Eccles had picked up cheap during the Agricultural Depression of 1920-21.
Eccles also was a director of such corporations as Pet Milk Company, Mountain
States Implement Company, and Amalgamated Sugar. As a big banker, Eccles
fitted in well with the group of powerful men who were operating Roosevelt.

There was some discussion in Congress as to whether Eccles ought to be on the
Federal Reserve Board at the same time he had all of these banks in Utah, but
he testified that he had very little to do with the First Securities
Corporation besides being President of it, and so he was confirmed as Chairman
of the Board.

Eugene Meyer, Jr. now resigned from the Board to spend more of his time
lending the two billion dollar capital of the Reconstruction Finance
Corporation, and determining the value of collateral by his own methods.

The Banking Act of 1935, which greatly increased Roosevelt’s power over the
nation’s finances, was an integral part of the legislation by which he
proposed to extend his reign in the United States. It was not opposed by the
people as was the National Recovery Act, because it was not so naked an
infringement of their liberties. It was, however, an important measure. First
of all, it extended the terms of office of the Federal Reserve Board of
Governors to fourteen years, or, three and a half times the length of a
Presidential term. This meant that a President assuming office who might be
hostile to the Board could not appoint a majority to it who would be favorable
to him. Thus, a monetary policy inaugurated before a President came into the
White House would go on regardless of his wishes.

The Banking Act of 1935 also repealed the clause of the Glass-Steagall Banking
Act of 1933, which had provided that a banking house could not be on the Stock
Exchange and also be involved in investment banking. This clause was a good
one, since it prevented a banking house from lending money to a corporation
which it owned. Still it is to be remembered that this clause covered up some
other provisions in that Act, such as the creation of the Federal Deposit
Insurance Corporation, providing insurance money to the amount of 150 million
dollars, to
guarantee fifteen billion dollars worth of deposits. This increased the power
of the big bankers over small banks and gave them another excuse to
investigate them. The Banking Act of 1933 also legislated that all earnings of
the Federal Reserve Banks must by law go to the banks themselves. At last the
provision in the Act that the Government share in the profits was gotten rid
of. It had never been observed, and the increase in the assets of the Federal
Reserve Banks from 143 million dollars in 1913 to 45 billion dollars in 1949
went entirely to the private stockholders of the banks. Thus, the one
constructive provision of the Banking Act of 1933 was repealed in 1935, and
also the Federal Reserve Banks were now permitted to loan directly to
industry, competing with the member banks, who could not hope to match their
capacity in arranging large loans.

When the provision that banks could not be involved in investment banking and
operate on the Stock Exchange was repealed in 1935, Carter Glass, originator
of that provision, was asked by reporters:

"Does that mean that J.P. Morgan can go back into investment banking?"

"Well, why not?" replied Senator Glass. "There has been an outcry all over the
country that the banks will not make loans. Now the Morgans can go back to
underwriting."

Because that provision was unfavorable to them, the bankers had simply clamped
down on making loans until it was repealed.

Newsweek of March 14, 1936, noted that:

"The Federal Reserve Board fired nine chairmen of Reserve Banks, explaining
that ‘it intended to make the chairmanships of the Reserve Banks largely a
part-time job on an honorary basis.’"

This was another instance of the centralization of control in the Federal
Reserve System. The regional district system had never been an important
factor in the administration of monetary policy, and the Board was not cutting
down on its officials outside of Washington. The Chairman of the Senate
Committee on Banking and Currency had asked, during the Gold Reserve Hearings
of 1934:

"Is it not true, Governor Young, that the Secretary of the Treasury for the
past twelve years has dominated the policy of the Federal Reserve Banks and
the Federal Reserve Board with respect to the purchase of United States
bonds?"

Governor Young had denied this, but it had already been brought out that on
both of his hurried trips to this country in 1927 and 1929 to dictate Federal
Reserve policy, Governor Montagu Norman of the Bank of England had gone
directly to Andrew Mellon, Secretary of the Treasury, to get him to purchase
Government securities on the open market and start the movement of gold out of
this country back to Europe.

160

The Gold Reserve Hearings had also brought in other people who had more than a
passing interest in the operations of the Federal Reserve System. James Paul
Warburg, just back from the London Economic Conference with Professor O.M.W.
Sprague and Henry L. Stimson, came in to declare that he thought we ought to
modernize the gold standard. Frank Vanderlip suggested that we do away with
the Federal Reserve Board and set up a Federal Monetary Authority. This would
have made no difference to the New York bankers, who would have selected the
personnel anyway. And Senator Robert L. Owen, longtime critic of the system,
made the following statement:

"The people did not know the Federal Reserve Banks were organized for
profit-making. They were intended to stabilize the credit and currency supply
of the country. That end has not been accomplished. Indeed, there has been the
most remarkable variation in the purchasing power of money since the System
went into effect. The Federal Reserve men are chosen by the big banks, through
discreet little campaigns, and they naturally follow the ideals which are
portrayed to them as the soundest from a financial point of view."

Benjamin Anderson, economist for the Chase National Bank of New York, said:

"At the moment, 1934, we have 900 million dollars excess reserves. In 1924,
with increased reserves of 300 million, you got some three or four billion in
bank expansion of credit very quickly. That extra money was put out by the
Federal Reserve Banks in 1924 through buying government securities and was the
cause of the rapid expansion of bank credit. The banks continued to get excess
reserves because more gold came in, and because, whenever there was a
slackening, the Federal Reserve people would put out some more. They held back
a bit in 1926.

Things firmed up a bit that year. And then in 1927 they put out less than 300
million additional reserves, set the wild stock market going, and that led us
right into the smash of 1929."

Dr. Anderson also stated that:

"The money of the Federal Reserve Banks is money they created. When they buy
Government securities they create reserves. They pay for the Government
securities by giving checks on themselves, and those checks come to the
commercial banks and are by them deposited in the Federal Reserve Banks, and
then money exists which did not exist before."

SENATOR BULKLEY: It does not increase the circulating medium at all?

ANDERSON: No.

This is an explanation of the manner in which the Federal Reserve Banks
increased their assets from 143 million dollars to 45 billion dollars in
thirty-five years. They did not produce anything, they were non-productive
enterprises, and yet they had this enormous profit, merely by creating money,
95 percent of it in the form of credit, which did not add
to the circulating medium. It was not distributed among the people in the form
of wages, nor did it increase the buying power of the farmers and workers. It
was credit-money created by bankers for the use and profit of bankers, who
increased their wealth by more than forty billion dollars in a few years
because they had obtained control of the Government’s credit in 1913 by
passing the Federal Reserve Act.

Marriner Eccles also had much to say about the creation of money. He
considered himself an economist, and had been brought into the Government
service by Stuart Chase and Rexford Guy Tugwell, two of Roosevelt’s early
brain-trusters. Eccles was the only one of the Roosevelt crowd who stayed in
office throughout his administration.

Before the House Banking and Currency Committee on June 24, 1941, Governor
Eccles said:

"Money is created out of the right to issue credit-money."

Turning over the Government’s credit to private bankers in 1913 gave them
unlimited opportunities to create money. The Federal Reserve System could also
destroy money in large quantities through open market operations. Eccles said,
at the Silver Hearings of 1939:

"When you sell bonds on the open market, you extinguish reserves."

Extinguishing reserves means wiping out a basis for money and credit issue,
or, tightening up on money and credit, a condition which is usually even more
favorable to bankers than the creation of money. Calling in or destroying
money gives the banker immediate and unlimited control of the financial
situation, since he is the only one with money and the only one with the power
to issue money in a time of money shortage. The money panics of 1873, 1893,
1920-21, and 1929-31, were characterized by a drawing in of the circulating
medium. In economical terms, this does not sound like such a terrible thing,
but when it means that people do not have money to pay their rent or buy food,
and when it means that an employer has to lay off three-fourths of his help
because he cannot borrow the money to pay them, the enormous guilt of the
bankers and the long record of suffering and misery for which they are
responsible would suggest that no punishment might be too severe for their
crimes against their fellowmen.

On September 30, 1940, Governor Eccles said:

"If there were no debts in our money system, there would be no money."

This is an accurate statement about our money system. Instead of money being
created by the production of the people, the annual increase in goods and
services, it is created by the bankers out of the debts of the people. Because
it is inadequate, it is subject to great fluctuations and is basically
unstable. These fluctuations are also a source of great profit. For that
reason, the Federal Reserve Board has consistently opposed any
legislation which attempts to stabilize the monetary system. Its position has
been set forth definitively in Chairman Eccles’ letter to Senator Wagner on
March 9, 1939, and the Memorandum issued by the Board on March 13, 1939.

Chairman Eccles wrote that:
". . . you are advised that the Board of Governors of the Federal Reserve
System does not favor the enactment of Senate Bill No. 31, a bill to amend the
Federal Reserve Act, or any other legislation of this general character."

The Memorandum of the Board stated, in its "Memorandum on Proposals to
maintain prices at fixed levels":

"The Board of Governors opposes any bill which proposes a stable price level,
on the grounds that prices do not depend primarily on the price or cost of
money; that the Board’s control over money cannot be made complete; and that
steady average prices, even if obtainable by official action, would not insure
lasting prosperity."

Yet William McChesney Martin, the Chairman of the Board of Governors in 1952,
said before the Subcommittee on Debt Control, the Patman Committee, on March
10, 1952 that "One of the fundamental purposes of the Federal Reserve Act is
to protect the value of the dollar."

Senator Flanders questioned him: "Is that specifically stated in the original
legislation setting up the Federal Reserve System?"

"No," replied Mr. Martin, "but it is inherent in the entire legislative
history and in the surrounding circumstances."

Senator Robert L. Owen has told us how it was taken out of the original
legislation against his will, and that the Board of Governors has opposed such
legislation. Apparently Mr. Martin does not know this.

Steady average prices, indeed, are impossible so long as we have the
speculators on the stock exchange driving prices up and down in order to reap
profits for themselves. Despite Governor Eccles’ insistence that steady
average prices would not insure lasting prosperity, they could do much to
bring about this condition. A man on a yearly wage of $2,500 is not more
prosperous if the price of bread increases five cents a loaf during the year.

In 1935, Eccles said before the House Committee on Banking and Currency:

"The Government controls the gold reserve, that is, the power to issue money
and credit, thus largely regulating the price structure."

This is an almost direct contradiction of Eccles’ statement in 1939 that
prices do not depend, primarily, on the price or cost of money.

In 1935, Governor Eccles stated before the House Committee:

"The Federal Reserve Board has the power of open market operations.
Open-market operations are the most important single instrument of
control over the volume and cost of credit in this country. When I say
"credit" in this connection, I mean money, because by far the largest part of
money in use by the people of this country is in the form of bank credit or
bank deposits. When the Federal Reserve Banks buy bills or securities in the
open market, they increase the volume of the people’s money and lower its
cost; and when they sell in the open market they decrease the volume of money
and increase its cost. Authority over these operations, which affect the
welfare of the whole people, must be invested in a body representing the
national interest."

Governor Eccles testimony exposes the heart of the money machine which Paul
Warburg revealed to his incredulous fellow bankers at Jekyll Island in 1910.
Most Americans comment that they cannot understand how the Federal Reserve
System operates. It remains beyond understanding, not because it is complex,
but because it is so simple. If a confidence man comes up to you and offers to
demonstrate his marvelous money machine, you watch while he puts in a blank
piece of paper, and cranks out a $100 bill. That is the Federal Reserve
System. You then offer to buy this marvelous money machine, but you cannot. It
is owned by the private stockholders of the Federal Reserve Banks, whose
identities can be traced partially, but not completely, to "the London
Connection."

At the House Banking and Currency Committee Hearings on June 6, 1960,
Congressman Wright Patman, Chairman, questioned Carl E. Allen, President of
the Federal Reserve Bank of Chicago. (p. 4).

PATMAN: "Now Mr. Allen, when the Federal Reserve Open Market Committee buys a
million dollar bond you create the money on the credit of the Nation to pay
for that bond, don’t you? ALLEN: That is correct.

PATMAN: And the credit of the Nation is represented by Federal Reserve Notes
in that case, isn’t it? If the banks want the actual money, you give Federal
Reserve notes in payment, don’t you?

ALLEN: That could be done, but nobody wants the Federal Reserve notes.

PATMAN: Nobody wants them, because the banks would rather have the credit as
reserves."

This is the most incredible part of the Federal Reserve operation and one
which is difficult for anyone to understand. How can any American citizen
grasp the concept that there are people in this country who have the power to
make an entry in a ledger that the government of the United States now owes
them one billion dollars, and to collect the principal and interest on this
"loan"?

Congressman Wright Patman tells us in "The Primer of Money", p. 38 of going
into a Federal Reserve Bank and asking to see their bonds on which the
American people are paying interest. After being shown the bonds, he asked to
see their cash, but they only had some ledgers and blank checks. Patman says,

"The cash, in truth, does not exist and has never existed. What we call ‘cash
reserves’ are simply bookkeeping credits entered upon ledgers
of the Federal Reserve Banks. The credits are created by the Federal Reserve
Banks and then passed along through the banking system."

Peter L. Bernstein, in A Primer On Money, Banking and Gold says:

"The trick in the Federal Reserve notes is that the Federal reserve banks lose
no cash when they pay out this currency to the member banks. Federal Reserve
notes are not redeemable in anything except what the Government calls ‘legal
tender’--that is, money that a creditor must be willing to accept from a
debtor in payment of sums owed him. But since all Federal Reserve notes are
themselves declared by law to be legal money, they are really redeemable only
in themselves . . . they are an irredeemable obligation issued by the Federal
Reserve Banks."91

As Congressman Patman puts it,

"The dollar represents a one dollar debt to the Federal Reserve System. The
Federal Reserve Banks create money out of thin air to buy Government bonds
from the United States Treasury, lending money into circulation at interest,
by bookkeeping entries of checkbook credit to the United States Treasury. The
Treasury writes up an interest bearing bond for one billion dollars. The
Federal Reserve gives the Treasury a one billion dollar credit for the bond,
and has created out of nothing a one billion dollar debt which the American
people are obligated to pay with interest." (Money Facts, House Banking and
Currency Committee, 1964, p. 9)

Patman continues,

"Where does the Federal Reserve system get the money with which to create Bank
Reserves?

Answer. It doesn’t get the money, it creates it. When the Federal Reserve
writes a check, it is creating money. The Federal Reserve is a total
moneymaking machine. It can issue money or checks."

In 1951, the Federal Reserve Bank of New York published a pamphlet, "A Day’s
Work at the Federal Reserve Bank of New York." On page 22, we find that:
"There is still another and more important element of public interest in the
operation of banks besides the safekeeping of money; banks can ‘create’ money.
One of the most important factors to remember in this connection is that the
supply of money affects the general level of prices--thecost of living. The
Cost of Living Index and money supply are parallel."

The decisions of the Federal Reserve Board, or rather, the decisions which
they are told to make by "parties unknown", affect the daily lives of every
American by the effect of these decisions on prices. Raising the interest
rate, or causing money to became "dearer" acts to limit the amount of money
available in the market, as does the raising of reserve

requirements by the Federal Reserve System. Selling bonds by the Open Market
Committee also extinguishes and lowers the money supply. Buying government
securities on the open market "creates" more money, as does lowering the
interest rate and making money "cheaper". It is axiomatic that an increase in
the money supply brings prosperity, and that a decrease in the money supply
brings on a depression. Dramatic increases in the money which outstrip the
supply of goods brings on inflation, "too much money chasing too few goods". A
more esoteric aspect of the monetary system is "velocity of circulation",
which sounds much more technical than it is. This is the speed at which money
changes hands; if it is gold buried in the peasant’s garden, that is a slow
velocity of circulation, caused by a lack of confidence in the economy or the
nation. Very rapid velocity of circulation, such as the stock market boom of
the late 1920s, means quick turnover, spending and investment of money, and
its stems from confidence, or overconfidence, in the economy. With a high
velocity of circulation, a smaller money supply circulates among as many
people and goods as a larger money supply would circulate with a slower
velocity of circulation. We mention this because the velocity of circulation,
or confidence in the economy, also is greatly affected by the Federal Reserve
actions. Milton Friedman comments in Newsweek, May 2, 1983, "The Federal
Reserve’s major function is to determine the money supply. It has the power to
increase or decrease the money supply at any rate it chooses."

This is an enormous power, because increasing the money supply can cause the
re-election of an administration, while decreasing it can cause an
administration to be defeated. Friedman goes on to criticize the Federal
Reserve, "How is it that an institution which has so poor a record of
performance nevertheless has so high a public reputation and even commands a
considerable measure of credibility for its forecasts?"

All open market transactions, which affect the money supply, are conducted for
a single System account by the Federal Reserve Bank of New York on the behalf
of all the Federal Reserve Banks, and supervised by an officer of the Federal
Reserve Bank of New York. The conferences at which decisions are made to buy
or sell securities by the Open Market Committee remain closed to the public,
and the deliberations also remain a mystery. On May 8, 1928, The New York
Times reported that Adolph C. Miller, Governor of the Federal Reserve Board,
testifying before the House Banking and Currency Committee, stated that open
market purchases and rediscount rates were established through
"conversations". At that time, the purchases on the open market amounted to
seventy or eighty million dollars a day, and would be ten times that today.
These are vast sums to be manipulated on the basis of mere "conversations",
but that is as much information as we can obtain.

166

Because of these mysterious transactions which affect the life, liberty and
happiness of every American citizen, there have been numerous proposals such
as Senate Document No. 23, presented by Mr. Logan on January 24, 1939, that
"The Government should create, issue and circulate all the currency and credit
needed to satisfy the spending power of the Government and the buying power of
the consumers. The privilege of creating and issuing money is not only the
supreme prerogative of Government, but it is the Government’s greatest
creative opportunity."

On March 21, 1960, Congressman Wright Patman used a simple illustration in the
Congressional Record of how banks "create money".

"If I deposit $100 with my bank and the reserve requirements imposed by the
Federal Reserve Bank are 20% then the bank can make a loan to John Doe of up
to $80. Where does the $80

come from? It does not come out of my deposit of $100; on the contrary, the
bank simply credits John Doe’s account with $80. The bank can acquire
Government obligations by the same procedure, by simply creating deposits to
the credit of the government. Money creating is a power of the commercial
banks . . . Since 1917 the Federal Reserve has given the private banks
forty-six billion dollars of reserves."

How this is done is best revealed by Governor Eccles at Hearings before the
House Committee on Banking and Currency on June 24, 1941:

ECCLES: "The banking system as a whole creates and extinguishes the deposits
as they make loans and investments, whether they buy Government Bonds or
whether they buy utility bonds or whether they make Farmer’s loans.

MR. PATMAN: I am thoroughly in accord with what you say, Governor, but the
fact remains that they created the money, did they not?

ECCLES: Well, the banks create money when they make loans and investments."

On September 30, 1941, before the same Committee, Governor Eccles was asked by
Representative Patman:

"How did you get the money to buy those two billion dollars worth of
Government securities in 1933?

ECCLES: That is what our money system is. If there were no debts in our money
system, there wouldn’t be any money."

On June 17, 1942, Governor Eccles was interrogated by Mr. Dewey.

ECCLES: "I mean the Federal Reserve, when it carries out an open market
operation, that is, if it purchases Government securities in the
open market, it puts new money into the hands of the banks which creates idle
deposits.

DEWEY: There are no excess reserves to use for this purpose?

ECCLES: Whenever the Federal Reserve System buys Government securities in the
open market,

or buys them direct from the Treasury, either one, that is what it does.

DEWEY: What are you going to use to buy them with? You are going to create
credit?

ECCLES: That is all we have ever done. That is the way the Federal Reserve
System operates.

The Federal Reserve System creates money. It is a bank of issue."

At the House Hearing of 1947, Mr. Kolburn asked Mr. Eccles:

"What do you mean by monetization of the public debt?

ECCLES: I mean the bank creating money by the purchase of Government
securities. All is created by debt--either private or public debt.

FLETCHER: Chairman Eccles, when do you think there is a possibility of
returning to a free and open market, instead of this pegged and artificially
controlled financial market we now have?

ECCLES: Never. Not in your lifetime or mine."

Congressman Jerry Voorhis is quoted in U.S. News, August 31, 1959, as
questioning Secretary of Treasury Anderson, "Do you mean that Banks, in buying
Government securities, do not lend out their customers’ deposits? That they
create the money they use to buy the securities?

ANDERSON: That is correct. Banks are different from other lending
institutions. When a savings association, an insurance company, or a credit
union makes a loan, it lends the very dollar that its customers have
previously paid in. But when a bank makes a loan, it simply adds to the
borrower’s deposit account in the bank by the amount of the loan. The money is
not taken from anyone. It is new money, recreated by the bank, for the use of
the borrower."

Strangely enough, there has never been a court trial on the legality or
Constitutionality of the Federal Reserve Act. Although it is on much the same
shaky grounds as the National Recovery Act, or NRA, which was challenged in
Schechter Poultry v. United States of America, 29 U.S. 495, 55 US 837.842
(1935), the NRA was ruled unconstitutional by the Supreme Court on the grounds
that "Congress may not abdicate or transfer to others its legitimate
functions. Congress cannot Constitutionally delegate its legislative authority
to trade or industrial associations or groups so as to empower them to make
laws."

Article 1, Sec. 8 of the Constitution provides that "The Congress shall have
power to borrow money on the credit of the United States . . . and to coin
Money, regulate the value thereof, and of foreign Coin, and fix the Standard
of Weights and Measures." According to the NRA decision, Congress cannot delegate this power to the Federal Reserve System, nor
can it delegate its legislative authority to the Federal Reserve System to
allow the System to fix the rate of bank reserves, the rediscount rate, or the
volume of money. All of these are "legislated" by the Federal Reserve Board,
meeting in legislative sessions to determine these matters and to issue "laws"
or regulations fixing them.

The Second World War gave the big bankers who owned the Federal Reserve System
a chance to unload on the country billions of dollars printed early in 1930,
in the biggest counterfeiting operation in history, all legalized by
Roosevelt’s government, of course. Henry Hazlitt writes in the January 4, 1943
issue of Newsweek Magazine:

"The money that began to appear in circulation a week ago, December 21, 1942,
was really printing press money in the fullest sense of the term, that is,
money which has no collateral of any kind behind it. The Federal Reserve
statement that ‘The Board of Governors, after consultation with the Treasury
Department, has authorized Federal Reserve Banks to utilize at this time the
existing stocks of currency printed in the early thirties, known as ‘Federal
Reserve Banknotes’. We repeat, these notes have absolutely no collateral of
any kind behind them."

Governor Eccles also testified to some other interesting matters of the
Federal Reserve and war finance at the Senate Hearings on the Office of Price
Administration in 1944:

"The currency in circulation was increased from seven billion dollars in four
years to twenty-one and a half billion. We are losing some considerable
amounts of gold during the war period. As our exports have gone out, largely
on a lend-lease basis, we have taken imports on which we have given dollar
balances. These countries are now drawing off these dollar balances in the
form of gold.

MR. SMITH: Governor Eccles, what is the objective that the foreign governments
are after in this projected program whereby we would contribute gold to an
international fund?

GOVERNOR ECCLES: I would like to discuss OPA, and leave the stabilization fund
for a time when I am prepared to go into it.

MR. SMITH: Just a minute. I feel that this fund is very pertinent to what we
are talking about today.

MR. FORD: I believe that the stabilization fund is entirely off the @OPA and
consequently we ought to stick to the business at hand."

The Congressmen never did get to discuss the Stabilization Fund, another setup
whereby we would give the impoverished countries of Europe back the gold which
had been sent over here. In 1945, Henry Hazlitt, commenting in Newsweek of
January 22, on Roosevelt’s annual budget message to Congress, quoted Roosevelt
as saying:

Hazlitt pointed out that the reserve requirement was not high, it was just
what it had been for the past thirty years. Roosevelt’s purpose was to free
more gold from the Federal Reserve System and make it available for the
Stabilization Fund, later called the International Monetary Fund, part of the
World Bank for Reconstruction and Development, the equivalent of the League
Finance Committee which would have swallowed the financial sovereignty of the
United States if the Senate had let us join it.

170

CHAPTER FOURTEEN

Congressional Exposé

"Mr. Volcker’s politics is something of an enigma."--New York Times

Since 1933 when Eugene Meyer resigned from the Federal Reserve Board of
Governors, no member of the international banking families has personally
served on the Board of Governors. They have chosen to work from behind the
scenes through carefully selected presidents of the Federal Reserve Bank of
New York and other employees.

The present chairman of the Federal Reserve Board of Governors is Paul
Volcker. His appointment was greeted by one well-known economist with the
following prediction, "Volcker’s selection has been by far the worst. Carter
has put Dracula in charge of the blood bank. To us, it means a crash and
depression in the 80s is more certain than ever."

Col. E.C. Harwood’s Research Report, August 6, 1979, gave much the same view.
"Paul Volcker is from the same mold as the unsound money men who have
misguided the monetary actions of this nation for the past five decades. The
outcome probably will be equally disastrous for the dollar and the U.S.
economy."

Despite these gloomy views, the report from The New York Times on the
selection of Volcker was positively ecstatic. On July 26, 1979, The Times
commented that Volcker learned "the business" from Robert Roosa, now partner
of Brown Brothers Harriman, and that Volcker had been part of the Roosa Brain
Trust at the Federal Reserve Bank of New York, and, later, at the Treasury in
the Kennedy administration. "David Rockefeller, the chairman of Chase, and Mr.
Roosa were strong influences in the Mr. Carter decision to name Mr. Volcker
for the Reserve Board chairmanship." The New York Times did not point out that
David Rockefeller and Robert Roosa had previously chosen Mr. Carter, a member
of the Trilateral Commission, as the presidential candidate of the Democratic
Party, or that Mr. Carter would hardly refuse to appoint their choice of Paul
Volcker as the new Chairman of the Federal Reserve Board. Nor is it straining
the point to be reminded that this manner of selection of the Chairman of the
Board of Governors is directly in the line of royal prerogative going back to
George Peabody’s initial agreement with N.M. Rothschild, to the Jekyll Island
meeting, and to the enactment of the Federal Reserve Act.

171

The Times noted that "Volcker’s choice was approved by European banks in Bonn,
Frankfurt and Zurich." William Simon, former Secretary of Treasury, was quoted
as saying "a marvelous choice." The Times further noted that the Dow market
rose on Volcker’s nomination, registering the best gains in three weeks for a
rise of 9.73 points, and that the dollar rose sharply on foreign exchange@ at
home and abroad.

Who was Volcker, that his appointment could have such an effect on the stock
market and the value of the dollar in foreign exchange? He represented the
most powerful house of "the London Connection," Brown Brothers Harriman, and
the London houses which directed the Rockefeller empire. On July 29, 1979, The
Times had said of Volcker, "New Man Will Chart His Own Course".

Volcker’s background shows that this was nonsense. His course has always been
charted for him by his masters in London. He attended Princeton, obtained an
M.A. at Harvard, and went to the London School of Economics 1951-52, the
banker’s graduate school. He then came to the Federal Reserve Bank of New York
as an economist from 1952-57, economist at Chase Manhattan Bank, 1957-61, with
Treasury Department 1961-65, as deputy under secretary for monetary affairs,
1963-65, and under secretary for monetary affairs, 1969-74. He then became
President of the Federal Reserve Bank of New York from 1975-79, when Carter,
at the behest of Robert Roosa and David Rockefeller, appointed him Chairman of
the Federal Reserve Board of Governors. He was succeeded as President of
Federal Reserve Bank of New York by Anthony Solomon, a Harvard Ph.D. who was
with the OPA 1941-42 and with the government financial mission to Iran
1942-46. He operated a canned food company in Mexico from 1951-61, was
president of International Investment Corp. for Yugoslavia 1969-72 (a
communist country), under secretary for monetary affairs at Treasury 1977-80.
In short, Solomon’s background was much the same as Paul Volcker’s.

The New York Times stated on December 2, 1981, "For years the Federal Reserve
was the second or third most secret institution in town. The Sunshine Act of
1976 penetrated the curtain a trifle. The board now holds a public meeting
once a week on Wednesday at 10 a.m., but not to discuss Monetary policy, which
is still regarded as top secret and not to be discussed in public." The Times
mentioned that when Open Market Committee meetings are held, Solomon and
Volcker sit together at the head of the table and relay the instructions which
they have received from abroad.

Behind Volcker and Solomon stands Robert Roosa, Secretary of the Treasury in
Carter’s shadow cabinet, and representing Brown Brothers Harriman, the
Trilateral Commission, the Council on Foreign Relations, the Bilderbergers,
and the Royal Economic Institute. He is a trustee of the
Rockefeller Foundation*, and a director of Texaco and American Express
companies. Dr. Martin Larson points out that "The international consortium of
financiers known as the Bilderbergers, who meet annually in profound secrecy
to determine the destiny of the western world, is a creature of the
Rockefeller-Rothschild alliance, and that it held its third meeting on St.
Simons Island, only a short distance from Jekyll Island." Larson also states
that "The Rockefeller interests work in close alliance with the Rothschilds
and other central banks."**

On June 18, 1983, President Ronald Reagan ended months of speculation by
announcing that he was reappointing Paul Volcker as Chairman of the Federal
Reserve Board of Governors for another four year term, although Volcker’s term
was not up until August 6, 1983. Reagan’s reappointment of a Carter appointee
puzzled some political observers, but apparently he had succumbed to
considerable pressure, as indicated by a lead editorial in The Washington
Post, June 10, 1983, "There is no one who matches Mr. Volcker in both
political standing and grasp of the intricate networks that make up the
world’s financial system." The anonymous writer gave no documentation for his
elevation of Volcker to the standing of the world’s greatest financier, and as
for his political standing, The New York Times commented on June 19, 1983,
"Mr. Volcker’s politics is something of an enigma." His "non-political" stance
conforms with the Washington tradition of "the political independence of the
Fed" which has been maintained for many years. However, the problem of its
dependence on "the London connection" has never been discussed in Washington.

In reality, Volcker is more of a politician than an economist. After attending
the London School of Economics, and finding out who issues the orders of the
international financial community, Volcker has ever since played the game. Not
once has he failed to carry out the orders of the "London Connection".

Can it really be possible that "The London Connection" exists, and that men
like Volcker and Solomon receive their instructions, in however devious or
indirect a manner, from foreign bankers? Let us look at the evidence,
circumstantial, to be sure, but circumstantial evidence of the quality which
has often sent men to the penitentiary or to the electric chair. John Moody
pointed out in 1911 that seven men of the Morgan group, allied with the
Standard Oil-Kuhn, Loeb group, ruled the United States. Where do these groups
stand in the financial picture today?

U.S. News published on April 11, 1983, a list of the largest bank holding
companies in the United States by assets as of December 31, 1982. Number 1 is
Citicorp, New York, with assets of $130 billion. This is Baker and
Morgan’s First National Bank of New York, merged with National City Bank in
1955, two of the largest purchasers of Federal Reserve Bank of New York stock
in 1914. Number 3, is Chase Manhattan, New York, with assets of $80.9 billion.
This is Chase and Bank of Manhattan merged, the Rockefeller and Kuhn Loeb
group, also purchasers of Federal Reserve Bank of New York stock in 1914.
Number 4 is Manufacturers Hanover of New York $64 billion, also purchaser of
Federal Reserve Bank of New York stock in 1914. Number 5 is J.P. Morgan
Company of New York, $58.6 billion in assets and holder of considerable
Federal Reserve Bank stock. Number 6 is Chemical Bank of New York, $48.3
billion also purchaser of Federal Reserve stock in 1914. And Number 11, First
Chicago Corporation, the First National Bank of Chicago which was principal
correspondent of the Morgan-Baker bank in New York, and which furnished the
first two presidents of the Federal Advisory Council.

The direct line which leads from the participants in the Jekyll Island
Conference of 1910 to the present day is illustrated by a passage from "A
Primer on Money", Committee on Banking and Currency, U.S. House of
Representatives, 88th Congress, 2d session, August 5, 1964, p. 75:

"The practical effect of requiring all purchases to be made through the open
market is to take money from the taxpayer and give it to the dealers. It
forces the Government to pay a toll for borrowing money. There are six ‘bank’
dealers: First National City Bank of New York; Chemical Crop. Exchange Bank,
New York, Morgan Guaranty Trust Co., New York, Bankers Trust of New York,
First National Bank of Chicago, and Continental Illinois Bank of Chicago."

Thus the banks which receive a "toll" on all money borrowed by the Government
of the United States are the same banks which planned the Federal Reserve Act
of 1913. There is ample evidence demonstrating the present preeminence of the
same banks which set up the Federal Reserve System in 1914. For instance,
Warren Brookes writes on the editorial page of The Washington Post, June 6,
1983:

"Citicorp (National City Bank and First National Bank of New York, merged in
1955) just recorded an 18.6% return on equity, J.P. Morgan, 17%, Chemical Bank
and Bankers Trust, nearly 16%, an exceptional rate of return."

These are the banks which bought the first issue of Federal Reserve Bank stock
in 1914, and which owned the controlling interest in the Federal Reserve Bank
of New York, which sets the interest rate and is the bank for all open market
operations.

These banks also profit steadily from the otherwise inexplicable fluctuations
in monetary growth and interest rates. Brookes further comments on "actual
monetary growth rates alternately gyrating from 0 to 17% in successive six
month periods for three recession-wracked years. The two measures of money
growth most admired by Milton Friedman M2 and M3,
have actually shown little change on a year to year basis in the 1972-82
period."

Thus we have money growth rates gyrating from 0 to 17% but no actual year to
year changes, which raises the question of why we cannot have stability of
monetary growth throughout the year. The answer is that the big profits are
made by these gyrations, and the next question is, who sets in motion these
gyrations? The answer is "the London Connection".

To draw attention from the continued control of the bankers and their heirs,
who obtained the government monopoly of the nation’s money and credit in 1913,
the paid propagandists of the controlled media monopoly and academia are
constantly trotting forth new and more exotic theories of economics. Thus
James Burnham, one of the National Review propagandists, won fame with a
ridiculous theory of "the managers". He postulated that the old arbiters of
wealth, the J.P. Morgans, the Warburgs and the Rothschilds had, by 1950,
disappeared from the scene, being replaced by a new class of "managers". This
theory, which had no foundation in fact, served to obscure the fact that the
same people still controlled the monetary system of the world. The "managers"
were just that, executives like Volcker who were front men, paid employees who
would continue to receive their paychecks only as long as they carried out
their employers’ instructions. Burnham remains a well-paid propagandist at the
National Review, which many prominent leaders, including President Reagan,
believe to be a "conservative" publication.

From 1914 to 1982, a period in which many thousands of American banks went
bankrupt, the original purchasers of Federal Reserve Bank stock have not only
survived but they have consolidated their power. And what of "the London
Connection"? Does it still exist, and is it still dictating the economic
destiny of the United States? The Washington Post, May 19, 1983, carried a
story datelined Nairobi, Kenya, noting the meeting of the African Development
Bank. "The British merchant bank, Morgan Grenfell and a syndicate of the
United States, Kuhn Loeb, Lehman Brothers International, the French Lazard
Freres and Britain’s Warburg are discreetly acting as financial advisors to
about ten debt-plagued African states."

There are the same names we encountered in 1914, still managing the finances
of the world, with profits for themselves but with disastrous results for
everyone else. Perhaps we can look for relief to the present Administration of
President Reagan. Unfortunately, before reaching him we have to run the gamut
of the long list of his principal staff, composed of men from J. Henry
Schroder, Brown Brothers Harriman, and other leading components of "The London
Connection".

Lopez Portillo, President of Mexico, in addressing the Mexican National
Congress of Mexico in September, 1982, called the world credit boom of the
past decade a financial pestilence akin to the Black Death which swept
Europe in the fourteenth century. "As in mediaeval times, it flattens country
after country. It is transmitted by rats and it yields unemployment and
misery, industrial bankruptcy and enrichment by speculation. The remedy
prescribed by faith healers is forced inactivity and depriving the patient of
food."

Forbes Magazine stated October 11, 1982, "The world gasps for liquidity, not
because the supply of money has contracted but because too much of it now goes
to pay off old debts rather than fund new productive investments."

The policy of high interest rates and tight money has been disastrous for the
United States. In early 1983, a slight easing of money and credit promises
some relief, but as long as the Federal Reserve system and its unseen
manipulators continue their control of the money supply, we can expect more
problems. The Nation on December 11, 1982, in commenting on economic problems,
stated, "The blame for all this lies at the door of the Federal Reserve System
working as usual on behalf of the international banking system."

The evidence of how the Federal Reserve System works on behalf of the
international banking system is graphically illustrated by a series of charts
drawn up by the staff of the Committee on Banking, Currency and Housing of the
House of Representatives, 94th Congress, 2d session, August, 1976, "FEDERAL
RESERVE DIRECTORS: A STUDY OF CORPORATE AND BANKING INFLUENCE".* We present as
our Chart V page 49 of this study, showing the interlocking directorates of
David Rockefeller. As our Chart VI we reproduce page 55 of this study, showing
the interlocking directorates of Frank R. Milliken, one of the Class C
Directors** of the Federal Reserve Bank of New York. In this chart are all the
main personages in our story of the Jekyll Island conference: Citibank, J.P.
Morgan and Company, Kuhn Loeb and Company, and many related firms. As Chart
VII we reproduce page 53 of this study, showing the interlocking directorates
of another Class C Director of the Federal Reserve Bank of New York, Alan
Pifer. As President of the Carnegie Corporation of New York, he interlocks
with J. Henry Schroder Trust Company, J. Henry Schroder Banking Corporation,
Rockefeller Center, Inc., Federal Reserve Bank of Boston, Equitable Life
Assurance Society (J.P. Morgan), and others. Thus an August, 1976 study from
the House Committee on Banking, Currency and Housing, brings before us all of
our main cast of personages, functioning today just as they did in 1914.

__________________________
* Due to space limitations, only five of the seventy-five charts in the study,
all of which show the connections between prominent, powerful individuals with
control in the Federal Reserve System have been selected to illustrate the
connections between officers and directors of the twelve Federal Reserve Banks
in 1976 and the firms listed in this book.

** "The three Class C Directors are appointed by the Board of Governors as
representatives of the public interest as a whole." p. 34, Congressional
Study, 1976.
__________________________
176

This 120 page Congressional study details public policy functions of the
Federal Reserve District Banks, how directors are selected, who is selected,
the public relations lobbying factor, bank domination and bank examination,
and corporate interlocks with Reserve banks. Charts were used to illustrate
Class A, Class B, and Class C directorships of each district bank. For each
branch bank a chart was designed giving information regarding bank appointed
directors and those appointed by the Board of Governors of the Federal Reserve
System.

In his Foreword to the study, Chairman Henry S. Reuss, (D-Wis) wrote:

"This Committee has observed for many years the influence of private interests
over the essentially public responsibilities of the Federal Reserve System. As
the study makes clear, it is difficult to imagine a more narrowly based board
of directors for a public agency than has been gathered together for the
twelve banks of the Federal Reserve System.

Only two segments of American society--banking and big business--have any
substantial representation on the boards, and often even these become merged
through interlocking directorates . . . . Small farmers are absent. Small
business is barely visible. No women appear on the district boards and only
six among the branches. Systemwide--including district and branch boards--only
thirteen members from minority groups appear.

The study raises a substantial question about the Federal Reserve’s
oft-repeated claim of "independence". One might ask, independent from what?
Surely not banking or big business, if we are to judge from the massive
interlocks revealed by this analysis of the district boards.

The big business and banking dominance of the Federal Reserve System cited in
this report can be traced, in part, to the original Federal Reserve Act, which
gave member commercial banks the right to select two-thirds of the directors
of each district bank. But the Board of Governors in Washington must share the
responsibility for this imbalance. They appoint the so-called "public" members
of the boards of each district bank, appointments which have largely reflected
the same narrow interests of the bank-elected members . . . . Until we have
basic reforms, the Federal Reserve System will be handicapped in carrying out
its public responsibilities as an economic stabilization and bank regulatory
agency. The System’s mandate is too essential to the nation’s welfare to leave
so much of the machinery under the control of narrow private interests.
Concentration of economic and financial power in the United States has gone
too far."

In a section of the text entitled "The Club System", the Committee noted:
"This ‘club’ approach leads the Federal Reserve to consistently dip into the
same pools--the same companies, the same universities, the same bank holding
companies--to fill directorships." This Congressional study concludes as
follows:

177

"Many of the companies on these tables, as mentioned earlier, have multiple
interlocks to the Federal Reserve System. First Bank Systems; Southeast
Banking Corporation; Federated Department Stores; Westinghouse Electric
Corporation; Proctor and Gamble; Alcoa; Honeywell, Inc.; Kennecott Copper;
Owens-Corning Fiberglass; all have two or more director ties to district or
branch banks.

In Summary, the Federal Reserve directors are apparently representatives of a
small elite group which dominates much of the economic life of this nation."
END OF CONGRESSIONAL REPORT.

178

ADDENDUM

As of 11:05 Tuesday, July 26, 1983, the list of member banks holding Federal
Reserve Bank of New York stock includes twenty-seven New York City banks. Listed
below are the number of shares held by ten of these banks, amounting to 66% of
the total outstanding number of shares, name

The tremendous number of shares held today as against the original purchases
in 1914 is brought about by Section 5 of the original Federal Reserve Act
which called for a member bank to buy and hold stock in the district Federal
Reserve Bank equal to 6% of its capital and surplus.

Currently, shares held by five of the above named banks comprise 53% of the
total Federal Reserve Bank of New York stock. An examination of the major
stockholders of the New York City banks shows clearly that a few families,
related by blood marriage, or business interests, still control the New York
City banks which, in turn, hold the controlling stock of the Federal Reserve
Bank of New York.

It is notable that three of the banks holding Federal Reserve Bank of New York
stock, in the amount of 270,893 shares, are subsidiaries of foreign banks. J.
Henry Schroder Bank and Trust is listed by Standard and Poors as a subsidiary
of Schroders Ltd. of London. The National Bank of North America is a
subsidiary of the National Westminster Bank, one of London’s "Big Five".
European American Bank is a subsidiary of the European American Bank, Bahamas,
LTD. It is interesting to note that the directors of the European American
Bank & Trust include Milton F. Rosenthal, president and Chief Operating
Officer of the international gold company,
Engelhard Minerals and Chemical; Hamilton F. Potter, a partner in Sullivan and
Cromwell (J. Henry Schroder Bank & Trust attorneys); Edward H. Tuck, partner
of Shearman and Sterling (Citibank’s attorneys); F.H. Ulrich and Hans
Liebkutsch, managing directors of the giant Midland Bank of London, one of the
"Big Five"; and Roger Alloo, Paul-Emmanuel Janssen, and Maurice Laure of the
Societe Generale de Banque (Brussels, Belgium). [See Chart III]

This information, derived from the latest issue of the tabulation available
from the Board of Governors, Federal Reserve System, is cited as current
evidence which indicates that the controlling stock in the Federal Reserve
Bank of New York, which sets the rate and scale of operations for the entire
Federal Reserve System is heavily influenced by banks directly controlled by
"The London Connection", that is, the Rothschild-controlled Bank of England.
[See Chart I]

180

APPENDIX I

E.C. Knuth, in The Empire of the City, priv. printed, 1946, p. 27, refers to
"the Bank of England, the full partner of the American Administration in the
conduct of the financial affairs of all the world" and cites the Encyclopaedia
Americana, 1943 edition.

Barron cites Lord Swaythling, (April 8, 1923), "Lord Swaythling said,
‘Exchange can only be run from London. This is the center in Exchange.’" (They
Told Barron, by Clarence W. Barron, founder of Baron’s Weekly, Harpers, New
York, 1930, p. 27.)

Exchange, in the international financial world, means the transactions in
money or securities, or simply, the "exchange" of the values of these
securities. It is necessary that this "exchange" take place where the values
can be established, and this place is the "City" in London.

London was established as the primary center of exchange because of the
"Consols" of the Bank of England, bonds which could never be redeemed, but
which paid a stable rate of return. Henry Clews writes, in The Wall Street
View, Silver Burdett Co. 1900, p. 255, "The Consolidated Act of 1757
consolidated the debts of the nation of England at 3%, which were kept in an
account at the Bank of England and is the great bulwark of its deposits." By
ostentatiously "dumping" "Consols" on the London Exchange after the Battle of
Waterloo, in a pretended panic, Nathan Meyer Rothschild then secretly bought
up the Consols sold in the panic by other holders at a low rate, and became
the largest holder of Consols, and thus won control of the Bank of England in
1815.

12% Dividends

Although a Labor government nationalized the Bank of England in 1946, The
Great Soviet Encyclopaedia points out (vol. I, p. 490c) that the Bank of
England continues to pay 12% dividends per annum, just as it had done prior to
the nationalization. The "Governor" is appointed by the government, in a
situation similar to that in the United States, where the Governors of the
Federal Reserve System are appointed by the President. However, as is pointed
out in the Encyclopaedia Americana v. 13, p. 272, "In practice, the governors
of the Bank of England have not hesitated to criticize and bring pressure on
the government in public."

Bank Rate

The interest rate set by the Bank of England is known as "the Bank rate", and
it is a controlling factor in interest rates throughout the world,
although rates in other countries may be higher or lower than this "Bank
rate". The Bank of England manages the government debt, and is called upon to
arbitrate in political affairs. It served as the intermediary with the Iran
revolutionaries in negotiating for the return of the American hostages--a
recent example.

We should not be surprised that the present Governor of the Bank of England,
Sir Gordon Richardson is a prominent international financial figure, who
appears elsewhere in these pages because of his connection with the J. Henry
Schroder @Wagg in London from 1962 to 1972, when he became Governor of the
Bank of England. He was also director of J. Henry Schroder Co., New York, and
Schroder Banking Corp., New York. He also serves as director of Rolls Royce
and Lloyd’s Bank. Although he resides in London, he maintains a home in New
York, and is listed in the current Manhattan directory simply as "G.
Richardson, 45 Sutton Place S.", although a prior listing showed him at 4
Sutton Place. Sutton Place was developed as a fashionable address for the
international set by Bessie Marbury, whom we earlier cited for her connection
with the Morgan family and the Roosevelts.

The present directors of the Bank of England (1982) include Leopold de
Rothschild of N.M. Rothschild & Sons, Sir Robert Clark, chairman of Hill
Samuel Bank, the most influential bank after Rothschilds, John Clay, of
Hambros Bank, and David Scholey, of Warburg Bank, and joint chairman of S.C.
Warburg Co.

Anthony Sampson writes, in "The Changing Anatomy of Britain", Random House,
New York, 1982, p. 279, "The more cosmopolitan banks with foreign experts and
directors, such as Warburgs, Montagus, Rothschilds and Kleinworts, had also
discovered a huge new source of profits in the market for Eurodollars which
began in the late fifties and multiplied through the 60s . . . British bankers
themselves controlled relatively small funds, but they knew how to make money
out of other people’s money."

The Eurodollar market, a new development in "created money" is monopolized by
the above firms.

Eurodollar Empire

"Today, together with allies on the island of Manhattan (Britain’s most
important piece of real estate), the British Empire controls the entire $1.5
trillion Eurodollar financial market, another $300-$500 billion in the Cayman
Islands, Bahamas, and $50-$100 billion in the Hong-Kong Singapore "Asia-dollar
market". . . . Consider the $1.5 trillion Eurodollar market an "outlaw" market
in the U.S. dollars over which this nation has no control. Here control and
profits are overwhelmingly in the hands of London banks, who set the terms of
lending and the interest rate on this mass of American dollars in relation to
the London Interbank Borrowing
Rate (LIBOR) . . . U.S. banks like Citibank (New York City), on whose board of
directors sits the powerful British financier, Lord Aldington, collaborate
openly in this market. At the same time, British banks including the known
central bank for the world’s drug trade, the Hongkong and Shanghai Bank, pour
into America to devour U.S. banks. In 1978 the Hongshang (Ed.--Hongkong and
Shanghai Bank) took over New York’s Marine Midland Bank, the state’s 11th
largest commercial bank. . . The British also control the creation of American
dollars. While Federal Reserve Board Chairman Paul Volcker tightens credit
against the domestic economy, British-controlled banks in the Cayman Islands
(such as the European American Bank--Ed.) a British possession 200 miles off
Florida, and in the Bermudas and a dozen other "free banking" computer
terminals create hundreds of billions of American dollars. How is this done?
There are no reserve ratios or other restrictions on the creation of
dollar-denominated credits in the Empire’s "free enterprise" banking. A $1
million bona fide credit coming from the United States can be turned into $20
to $100 million in dollar-denominated credits as it passes through the British
system without reserve ratios."*

Not only the financial power, but also the legal power, has remained seated in
Britain. The Washington Post commented on June 18, 1983 that after the
American Revolution, all the old laws remained in effect in the new United
States: Some of these laws of "English common law" dated back to 1278, long
before America was discovered.

This enormous financial power of "the City" is revealed in many areas. Dean
Acheson states, in "Present at the Creation", 1969, W.W. Norton, New York, p.
779, "We stayed at the embassy residence, the old J.P. Morgan mansion, 14
Prince’s Gate, facing Hyde Park." How many Americans are aware that the U.S.
Embassy residence in London is the J.P. Morgan home, or that Dean Acheson, a
former Morgan employee, described himself as Secretary of State on p. 505, "My
own attitude had long been, and was known to have been, pro-British." No one
commented on an American Secretary of State’s open bias in favor of England.

The Federal Reserve "created" money is not used only for financial matters;
this money is also used to maintain the bankers’ control of every aspect of
political, economic and social life. It is used to bankroll the enormous
expenditures of political candidates, the swollen budgets of universities, the
huge outlays required to start newspapers or magazines, and a vast array of
foundations, "think-tanks" and other instruments of mind control.

Psychological Warfare

Few Americans know that almost every development in psychology in the United
States in the past sixty-five years has been directed by the Bureau of
Psychological Warfare of the British Army. A short time ago,

__________________________

* Harpers Magazine, Feb. 1980
__________________________
183
the present writer learned a new name, The Tavistock Institute of London, also
known as the Tavistock Institute of Human Relations. "Human relations" covers
every aspect of human behavior, and it is the modest goal of the Tavistock
Institute to obtain and exercise control over every aspect of human behavior
of American citizens.

Because of the intensive artillery barrages of World War I, many soldiers were
permanently impaired by shell shock. In 1921, the Marquees of Tavistock, 11th
Duke of Bedford, gave a building to a group which planned to conduct
rehabilitation programs for shell shocked British soldiers. The group took the
name of "Tavistock Institute" after its benefactor. The General Staff of the
British Army decided it was crucial that they determine the breaking point of
the soldier under combat conditions. The Tavistock Institute was taken over by
Sir John Rawlings Reese, head of the British Army Psychological Warfare
Bureau. A cadre of highly trained specialists in psychological warfare was
built up in total secrecy. In fifty years, the name "Tavistock Institute’
appears only twice in the Index of the New York Times, yet this group,
according to LaRouche and other authorities, organized and trained the entire
staffs of the Office of Strategic Services (OSS), the Strategic Bombing
Survey, Supreme Headquarters of the Allied Expeditionary Forces, and other key
American military groups during World War II. During World War II, the
Tavistock Institute combined with the medical sciences division of the
Rockefeller Foundation for esoteric experiments with mind-altering drugs. The
present drug culture of the United States is traced in its entirety to this
Institute, which supervised the Central Intelligence Agency’s training
programs. The "LSD counter culture" originated when Sandoz A.G., a Swiss
pharmaceutical house owned by S.G. Warburg & Co., developed a new drug from
lysergic acid, called LSD. James Paul Warburg (son of Paul Warburg who had
written the Federal Reserve Act in 1910), financed a subsidiary of the
Tavistock Institute in the United States called the Institute for Policy
Studies, whose director, Marcus Raskin, was appointed to the National Security
Council. James Paul Warburg set up a CIA program to experiment with LSD on CIA
agents, some of whom later committed suicide. This program, MK-Ultra,
supervised by Dr. Gottlieb, resulted in huge lawsuits against the United
States Government by the families of the victims.

The Institute for Policy Studies set up a campus subsidiary, Students for
Democratic Society (SDS), devoted to drugs and revolution. Rather than finance
SDS himself, Warburg used CIA funds, some twenty million dollars, to promote
the campus riots of the 1960s.

The English Tavistock Institute has not restricted its activities to left-wing
groups, but has also directed the programs of such supposedly "conservative"
American think tanks as the Herbert Hoover Institute at Stanford University,
Heritage Foundation, Wharton, Hudson, Massachusetts Institute of Technology,
and Rand. The "sensitivity training" and "sexual encounter" programs of the most radical California groups
such as Esalen Institute and its many imitators were all developed and
implemented by Tavistock Institute psychologists.

One of the rare items concerning the Tavistock Institute appears in Business
Week, Oct. 26, 1963, with a photograph of its building in the most expensive
medical offices area of London. The story mentions "the Freudian bias" of the
Institute, and comments that it is amply financed by British blue-chip
corporations, including Unilever, British Petroleum, and Baldwin Steel.
According to Business Week, the psychological testing programs and group
relations training programs of the Institute were implemented in the United
States by the University of Michigan and the University of California, which
are hotbeds of radicalism and the drug network.

It was the Marquees of Tavistock, 12th Duke of Bedford, whom Rudolf Hess flew
to England to contact about ending World War II. Tavistock was said to be
worth $40 million in 1942. In 1945, his wife committed suicide by taking an
overdose of pills.

186

BIOGRAPHIES

NELSON W. ALDRICH (1841-1915)

Senator from Rhode Island; head of National Monetary Commission; his daughter
Abby Aldrich married John D. Rockefeller, Jr.; he became the grandfather of
his namesake. Nelson Aldrich Rockefeller, as well as the present David
Rockefeller and Laurence Rockefeller.

WILLIAM JENNINGS BRYAN (1860-1925)

Woodrow Wilson’s Secretary of State, three times losing presidential candidate
of the Democratic Party, in 1896, 1900, and 1908, and head of the Democratic
Party.

ALFRED OWEN CROZIER (1863-1939)

A prominent attorney in Grand Rapids, Cincinnati, and New York, Crozier wrote
eight books on legal and monetary problems, focussing on his opposition to the
supplanting of Constitutional money by the corporation currency printed by
private firms for their profit.

CLARENCE DILLON (1882-1979)

Born in San Antonio, Texas, son of Samuel Dillon and Bertha Lapowitz. Harvard,
1905. Married Anne Douglass of Milwaukee. His son, C. Douglas Dillon (later
Secretary of the Treasury, 1961-65) was born in Geneva, Switzerland in 1909
while they were abroad. Dillon met William A. Read, founder of the Wall Street
bond broker William A. Read and Company, through introduction by Harvard
classmate William A. Phillips in 1912 and Dillon joined Read’s Chicago office
in that year. He moved to New York in 1914. Read died in 1916, and Dillon
bought a majority interest in the firm. During World War 1, Bernard Baruch,
chairman of the War Industries Board, (known as the Czar of American industry)
asked Dillon to be assistant chairman of the War Industries Board. In 1920,
William A. Read & Company name was changed to Dillon, Read & Company. Dillon
was director of American Foreign Securities Corporation, which he had set up
in 1915 to finance the French Government’s purchases of munitions in the
United States. His righthand man at Dillon Read, James Forrestal, became
Secretary of the Navy, later Secretary of Defense, and died under mysterious
circumstances at a Federal hospital. In 1957, Fortune Magazine listed Dillon
as one of the richest men in the United States, with a fortune then estimated
to be from $150 to $200 million.

ALAN GREENSPAN (1926- )

Appointed by President Reagan to succeed Paul Volcker as Chairman of the Board
of Governors of the Federal Reserve System in 1987. Greenspan had succeeded
Herbert Stein as chairman of the President’s Council of Economic

187

Advisors in 1974. He was the protégé of former chairman of the Board of
Governors, Arthur Burns of Austria (Bernstein). Burns was a monetarist
representing the Rothschild’s Viennese School of Economics, which manifested
its influence in England through the Royal Colonial Society, a front for
Rothschilds and other English bankers who stashed their profits from the world
drug trade in the Hong Kong Shanghai Bank. The staff economist for the Royal
Colonial Society was Alfred Marshall, inventor of the monetarist theory, who,
as head of the Oxford Group, became the patron of Wesley Clair Mitchell, who
founded the National Bureau of Economic Research for the Rockefellers in the
United States. Mitchell, in turn, became the patron of Arthur Burns and Milton
Friedman, whose theories are now the power techniques of Greenspan at the
Federal Reserve Board. Greenspan is also the protégé of Ayn Rand, a weirdo who
interposed her sexual affairs with guttural commands to be selfish. Rand was
also the patron of CIA propagandist William Buckeley and the National Review.
Greenspan was director of major Wall Street firms such as J.P. Morgan Co.,
Morgan Guaranty Trust (the American bank for the Soviets after the Bolshevik
Revolution of 1917), Brookings Institution, Bowery Savings Bank, the Dreyfus
Fund, General Foods, and Time, Inc. Greenspan’s most impressive achievement
was as chairman of the National Commission on Social Security from 1981-1983.
He juggled figures to convince the public that Social Security was bankrupt,
when in fact it had an enormous surplus. These figures were then used to
fasten onto American workers a huge increase in Social Security withholding
tax, which invoked David Ricardo’s economic dictum of the iron law of wages,
that workers could only be paid a subsistence wage, and any funds beyond that
must be extorted from them forcibly by tax increases. As a partner of J.P.
Morgan Co. since 1977, Greenspan represented the unbroken line of control of
the Federal Reserve System by the firms represented at the secret meeting on
Jekyll Island in 1910, where Henry P. Davison, righthand man of J.P. Morgan,
was a key figure in the drafting of the Federal Reserve Act. Within days of
taking over as chairman of the Federal Reserve Board, Greenspan immediately
raised the interest rate on Sept. 4, 1987, the first such increase in three
years of general prosperity, and precipitated the stock market crash of Oct.,
1987, Black Monday, when the Dow Jones average plunged 508 points. Under
Greenspan’s direction, the Federal Reserve Board has steadily nudged the
United States deeper and deeper into recession, without a word of criticism
from the complaisant members of Congress.

COLONEL EDWARD MANDELL HOUSE (1858-1938)

Son of a Rothschild agent in Texas. Succeeded in electing five consecutive
governors of Texas; became Woodrow Wilson’s advisor in 1912. Cooperated with
Paul Warburg to get the Federal Reserve Act passed by Congress in 1913.

ROBERT MARION LAFOLLETTE (1855-1925)

Served in Senate from Wisconsin 1905-25. Led agrarian reformers in opposing
Eastern bankers and their plans for the Federal Reserve Act. Ran for President
in 1924 on Progressive-Socialist ticket.

188

CHARLES AUGUSTUS LINDBERGH, SR. (1860-1924)

Congressman from Minnesota (1907-1917) who led the fight against enactment of
the Federal Reserve Act in 1913. He served until 1917 when he resigned to run
for governor of Minnesota. He ran a good campaign despite adverse newspaper
attacks led by The New York Times. His campaign was adversely affected when
Federal agents burned his books, including Why Is Your Country At War? and the
papers and contents of his home office in Little Falls, Minnesota.

LOUIS T. McFADDEN (1876-1936)

Congressman and Chairman of the House Banking and Currency Committee, 1927-33;
courageously opposed the manipulators of the Federal Reserve System in the
1920’s and the 1930’s. Introduced bills to impeach Federal Reserve Board of
Governors and allied officials. After three attempts on his life, he died
mysteriously.

JOHN PIERPONT MORGAN (1837-1913)

Considered the dominant American financier at the turn of the century. Who’s
Who in 1912 stated he "controls over 50,000 miles of railroads in the United
States." Organized United States Steel Corporation. Became representative of
House of Rothschild through his father, Junius S. Morgan, who had become
London partner of George Peabody & Company, later Junius S. Morgan Company, a
Rothschild agent. John Pierpont Morgan, Jr. succeeded his father as head of
the Morgan empire.

DAVID MULLINS (1946- )

Appointed Governor of the Federal Reserve Board May 21, 1990, David Mullins’
term runs to Jan. 31, 1996. He was recently nominated to serve as Vice
Chairman of the Federal Reserve Board, and served as Assistant Secretary of
the Treasury for Domestic Finance 1988-90, receiving the department’s highest
award, the Alexander Hamilton Award, for his service in such programs as
synthetic fuels, federal finance, Farm Credit Assistance Board, and author of
the President’s Plan for rescuing the savings and loan institutions. He is a
distant cousin of the author, descended from John Mullins, the first recorded
settler in the western area of Virginia, hero of the battle of King’s
Mountain, and recipient of a 200 acre grant of land for his service in the
American Revolution.

WRIGHT PATMAN (1893-1976)

Congressman and Chairman of the House Banking and Currency Committee 1963-74.
Led the fight in Congress to stop the manipulators of the Federal Reserve
System from 1937 to his death in 1976.

CONGRESSMAN ARSENE PUJO

Served in Congress 1903-1913. Democrat from Louisiana. Chairman of House
Banking and Currency Committee. Chairman of "Pujo Hearings" Subcommittee,
1912.

Born in Rothschild house in Frankfurt, Germany. Emigrated to United States,
married Therese Loeb, daughter of Solomon Loeb, founder of Kuhn, Loeb and Co.
Schiff became senior partner of Kuhn, Loeb and Co., and as representative of
Rothschild interests gained control of most of railway mileage in United
States.

BARON KURT VON SCHRODER (1889- )

Adolph Hitler’s personal banker, advanced funds for Hitler’s accession to
power in Germany in 1933; German representative of the London and New York
branches of J. Henry Schroder Banking Corporation; SS Senior Group Leader;
director of all German subsidiaries of I.T.T; Himmler’s Circle of Friends;
advisor to board of directors, Deutsche Reichsbank (German central bank).

ANTHONY MORTON SOLOMON (1919- )

Educated at Harvard, economist Office of Price Administration, 1941-42;
financial mission to Iran, 1942-46; Agency for international Development South
America, 1965-69; president international Investment Corporation for
Yugoslavia 1969-72; advisor to Chairman, Ways and Means Committee, House of
Representatives, 1972-73; Undersecretary Monetary Affairs, U.S. Treasury,
1977-80; president Federal Reserve Bank of New York, 1980-

SAMUEL UNTERMYER (1858-1940)

A partner of the law firm of Guggenheimer and Untermyer of New York, who
conducted the "Pujo Hearings" of the House Banking and Currency Committee in
1912. Counsel for Rogers and Rockefeller in many large suits against F.
Augustus Heinze, Thomas W Lawson and others. Earned a single fee of $775,000
for handling merger of Utah Copper Company. Reported in The New York Times May
26, 1924 as urging immediate recognition of Soviet Russia at Carnegie Hall
meeting. Untermyer’s prestige and power is illustrated by the fact that this
front page obituary in The New York Times covered six columns. His listing in
Who’s Who was the longest for thirteen years.

FRANK VANDERLIP (1864-1937)

Assistant Secretary of Treasury 1897-1901; won prestige for financing Spanish
American War by floating $200,000,000 in bonds during his incumbency for what
is known as "National City Bank’s War" President of National City Bank
1909-19. One of the original Jekyll Island group who wrote Federal Reserve Act
in November, 1910. No mention of this important fact is made in extensive
obituary in The New York Times, June 30, 1937.

190

GEORGE SYLVESTER VIERECK (1884-1962)

Author of the definitive study The Strangest Friendship in History, Woodrow
Wilson and Col. House, Liveright, 1932. A leading poet of the early 1900’s,
reviewed on the front page of The New York Times Book Review, and known as the
leading German-American citizen of the United States.

PAUL VOLCKER (1927- )

Chairman of the Federal Reserve Board of Governors since 1979, appointed by
President Carter, reappointed by President Reagan for another four year term
beginning August 6, 1983. Educated at Princeton, Harvard and London School of
Economics; employed by Federal Reserve Bank of New York, 1952-57; Chase
Manhattan Bank, 1957-61; Treasury Department, 1961-74; president Federal
Reserve Bank of New York, 1975-79.

PAUL WARBURG (1868-1932)
Conceded to be the actual author of our central bank plan, the Federal Reserve
System, by knowledgeable authorities. Emigrated to the United States from
Germany 1904; partner, Kuhn Loeb and Company bankers, New York; naturalized
1911. Member of the original Federal Reserve Board of Governors, 1914-1918;
president Federal Advisory Council, 1918-1928. Brother of Max Warburg, who was
head of German Secret Service during World War I and who represented Germany
at the Peace Conference, 1918-1919, while Paul was chairman of the Federal
Reserve System.

SIR WILLIAM WISEMAN (1885-1962)

Partner of Kuhn, Loeb and Company; head of British Secret Service during World
War I. Worked closely with Col. House dominating the United States and
England.

192

BIBLIOGRAPHY

Newspapers:

New York Times 1858-1983

Washington Post 1933-1983

Periodicals:

Barron’s Weekly 1921-1983

Business Week 1929-1983

Forbes Magazine 1917-1983

Fortune 1930-1983

Harper’s 1850-1983

National Review 1955-1983

Newsweek 1933-1983

The Nation 1865-1983

The New Republic 1914-1983

Time 1923-1983

Books:

Current Biography 1940-1983 H.W. Wilson Co., N.Y.

Dictionary of National Biography, Scribners, N.Y. 1934-1965

Directory of Directors, London 1896-1983

Directory of Directors In The City of New York 1898-1918

The Concise Dictionary of National Biography, 1903-1979, Oxford University

While lecturing in many countries, and appearing on radio and television
programs as a guest, the author is frequently asked questions about the Federal
Reserve System. The most frequently asked questions and the answers are as
follows:

Q: What is the Federal Reserve System?

A: The Federal Reserve System is not Federal; it has no reserves; and it is not
a system, but rather, a criminal syndicate. It is the product of criminal
syndicalist activity of an international consortium of dynastic families
comprising what the author terms "The World Order" (see "THE WORLD ORDER" and
"THE CURSE OF CANAAN", both by Eustace Mullins). The Federal Reserve system is a
central bank operating in the United States. Although the student will find no
such definition of a central bank in the textbooks of any university, the author
has defined a central bank as follows: It is the dominant financial power of the
country which harbors it. It is entirely private-owned, although it seeks to
give the appearance of a governmental institution. It has the right to print and
issue money, the traditional prerogative of monarchs. It is set up to provide
financing for wars. It functions as a money monopoly having total power over all
the money and credit of the people.

Q: When Congress passed the Federal Reserve Act on December 23, 1913, did the
Congressmen know that they were creating a central bank?

A: The members of the 63rd Congress had no knowledge of a central bank or of its
monopolistic operations. Many of those who voted for the bill were duped; others
were bribed; others were intimidated. The preface to the Federal Reserve Act
reads "An Act to provide for the establishment of Federal reserve banks, to
furnish an elastic currency, to afford means of rediscounting commercial papers,
to establish a more effective supervision of banking in the United States, and
for other purposes." The unspecified "other purposes" were to give international
conspirators a monopoly of all the money and credit of the people of the United
States; to finance World War I through this new central bank, to place American
workers at the mercy of the Federal Reserve system’s collection agency, the
Internal Revenue Service, and to allow the monopolists to seize the assets of
their competitors and put them out of business.

Q: Is the Federal Reserve system a government agency?

A: Even the present chairman of the House Banking Committee claims that the
Federal Reserve is a government agency, and that it is not privately owned. The
fact is that the government has never owned a single share of Federal Reserve
Bank stock. This charade stems from the fact that the President of the United
States appoints the Governors of the Federal Reserve Board, who are then
confirmed by the Senate. The secret author of the Act, banker Paul Warburg, a
representative of the Rothschild bank, coined the name "Federal" from thin air
for the Act, which he wrote to achieve two of his pet aspirations, an "elastic
currency", read (rubber check), and to facilitate trading in acceptances,
international trade credits. Warburg was founder and president of the
International Acceptance Corporation, and made billions in profits by trading in
this commercial paper. Sec. 7 of the Federal Reserve Act provides "Federal
reserve banks, including the capital and surplus therein, and income derived
therefrom, shall be exempt from Federal, state and local taxation, except taxes
on real estate." Government buildings do not pay real estate tax.

A: Federal Reserve notes are actually promissory notes, promises to pay, rather
than what we traditionally consider money. They are interest bearing notes
issued against interest bearing government bonds, paper issued with nothing but
paper backing, which is known as fiat money, because it has only the fiat of the
issuer to guarantee these notes. The Federal Reserve Act authorizes the issuance
of these notes "for the purposes of making advances to Federal reserve banks...
The said notes shall be obligations of the United States. They shall be redeemed
in gold on demand at the Treasury Department of the United States in the
District of Columbia." Tourists visiting the Bureau of Printing and Engraving on
the Mall in Washington, D.C. view the printing of Federal Reserve notes at this
governmental agency on contract from the Federal Reserve System for the nominal
sum of .00260 each in units of 1,000, at the same price regardless of the
denomination. These notes, printed for a private bank, then become liabilities
and obligations of the United States government and are added to our present $4
trillion debt. The government had no debt when the Federal Reserve Act was
passed in 1913.

Q: Who owns the stock of the Federal Reserve Banks?

A: The dynastic families of the ruling World Order, internationalists who are
loyal to no race, religion, or nation. They are families such as the Rothschilds,
the Warburgs, the Schiffs, the Rockefellers, the Harrimans, the Morgans and
others known as the elite, or "the big rich".

Q: Can I buy this stock?

A: No. The Federal Reserve Act stipulates that the stock of the Federal Reserve
Banks cannot be bought or sold on any stock exchange. It is passed on by
inheritance as the fortune of the "big rich". Almost half of the owners of
Federal Reserve Bank stock are not Americans.

Q: Is the Internal Revenue Service a governmental agency?

A: Although listed as part of the Treasury Department, the IRS is actually a
private collection agency for the Federal Reserve System. It originated as the
Black Hand in mediaeval Italy, collectors of debt by force and extortion for the
ruling Italian mob families. All personal income taxes collected by the IRS are
required by law to be deposited in the nearest Federal Reserve Bank, under Sec.
15 of the Federal Reserve Act, "The moneys held in the general fund of the
Treasury may be ....deposited in Federal reserve banks, which banks, when
required by the Secretary of the Treasury, shall act as fiscal agents of the
United States."

Q: Does the Federal Reserve Board control the daily price and quantity of money?

A: The Federal Reserve Board of Governors, meeting in private as the Federal
Open Market Committee with presidents of the Federal Reserve Banks, controls all
economic activity throughout the United States by issuing orders to buy
government bonds on the open market, creating money out of nothing and causing
inflationary pressure, or, conversely, by selling government bonds on the open
market and extinguishing debt, creating deflationary pressure and causing the
stock market to drop.

Q: Can Congress abolish the Federal Reserve System?

A: The last provision of the Federal Reserve Act of 1913, Sec. 30, states, "The
right to amend, alter or repeal this Act is expressly reserved." This language
means that Congress can at any time move to abolish the Federal Reserve System,
or buy back the stock and make it part of the Treasury Department, or to altar
the System as it sees fit. It has never done so.

Q: Are there many critics of the Federal Reserve beside yourself?

A: When I began my researches in 1948, the Fed was only thirty-four years old.
It was never mentioned in the press. Today the Fed is discussed openly in the
news section and the financial pages. There are bills in congress to have the
Fed audited by the Government Accounting Office. Because of my expose, it is no
longer a sacred cow, although the Big Three candidates for President in 1992,
Bush, Clinton and Perot, joined in a unanimous chorus during the debates that
they were pledged not to touch the Fed.

Q: Have you suffered any personal consequences because of your expose of the
Fed?

A: I was fired from the staff of the Library of Congress after I published this
expose in 1952, the only person ever discharged from the staff for political
reasons. When I sued, the court refused to hear the case. The entire German
edition of this book was burned in 1955, the only book burned in Europe since
the Second World War. I have endured continuous harassment by government
agencies, as detailed in my books "A WRIT FOR MARTYRS" and "MY LIFE IN CHRIST".
My family also suffered harassment. When I spoke recently in Wembley Arena in
London, the press denounced me as "a sinister lunatic".

Q: Does the press always support the Fed?

A: There have been some encouraging defections in recent months. A front page
story in the Wall Street Journal, Feb. 8, 1993, stated, "The current Fed
structure is difficult to justify in a democracy. It’s an oddly undemocratic
institution. Its organization is so dated that there is only one Reserve bank
west of the Rockies, and two in Missouri...Having a central bank with a monopoly
over the issuance of the currency in a democratic society is a very difficult
balancing act."